It’s only a small victory in the battle against predatory loans, but there’s now one less bank offering a high-risk payday lending product to consumers. Regions Bank has closed the door on its payday loan-esque deposit advance product.
Regions announced Wednesday that it would discontinue its deposit advance product - Regions Ready Advance.
The Birmingham, AL-based bank was just one of the handful of depository institutions that still offer direct deposit advance loans. Banks’ deposit advance services differ little from the typical storefront payday loan operation – both offer high-interest, short-term loans meant to get consumers out of emergency financial situations, but in reality have been found to trap them in an ongoing cycle of debt.
Banks offering payday loan-like products have come under increased scrutiny by federal and state regulators in recent months.
In December, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), which over see institutions such as Wells Fargo that offer similar payday lending products, issued guidance directing their banks to asses borrower’s ability to repay and limit repeat lending. Because Regions is regulated by the Federal Reserve it was not subject to the new guidance.
Back in January 2013, five U.S. senators asked regulators to put a stop to bank payday loans. In the letter, the senators urge the Federal Reserve, FDIC and Comptroller of the Currency to stop federally regulated banks from engaging in payday lending and to prevent further expansion of payday lending before this predatory practice spreads.
Following Wednesday’s announcement, the Center for Responsible Learning urged Fifth Third Bank, also regulated by the Federal Reserve, to discontinue its payday loan product – Access Now.
Regions Bank Discontinues Debt-Trap Payday Loans [Center for Responsible Lending]