CFPB Statement on Deposit Advance Product Announcements by Banking Regulators

WASHINGTON, D.C. — Today, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) issued a proposed supervisory statement to financial institutions that offer deposit advance products. In addition, today the Board of Governors of the Federal Reserve System (Board) issued a statement to emphasize to state member banks their shared concern of the consumer risks associated with deposit advance products.

These statements addressed risks associated with these short-term, small-dollar loans. The Consumer Financial Protection Bureau (CFPB) also sees significant consumer risks and looks forward to continuing its work with the other banking regulators to address the concerns in this market.

As described this week in the CFPB study, “Payday Loans and Deposit Advance Products: A White Paper of Initial Data Findings,” the CFPB believes deposit advance products as currently structured raise serious consumer protection concerns related to the sustained use of a high-cost product.

The statements by the Board, and the FDIC and the OCC, are based in large part on many of the same concerns motivating the CFPB’s ongoing work in this area. As the CFPB study makes clear, the data gathered thus far indicates that further attention is needed to protect consumers.

Among other authorities, the CFPB is authorized to implement federal consumer financial law to ensure that markets for consumer financial products and services are fair, transparent, and competitive. The CFPB also has authority to identify as unlawful unfair, deceptive, or abusive acts or practices in connection with the offering of such consumer financial products and services. Such consumer financial products and services include deposit advance products and payday loans, whether provided by banks or by other institutions such as storefront and Internet payday lenders. The CFPB expects to use its authorities to provide protections to consumers once further analysis of the short-term, high-cost loan market is complete.

The CFPB looks forward to continuing to coordinate with the banking regulators to ensure consistent and effective regulatory and supervisory treatment of payday and deposit advance products.

The report, “Payday Loans and Deposit Advance Products,” can be found at: http://www.consumerfinance.gov/reports/white-paper-on-payday-loans-and-deposit-advance-products/

A press release about the study is available at: http://www.consumerfinance.gov/pressreleases/the-cfpb-finds-payday-and-deposit-advance-loans-can-trap-consumers-in-debt/

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.