Payday and advance deposit loans have been getting a lot of regulatory attention recently.
"The Consumer Financial Protection Bureau has begun examining payday loans, and the Federal Deposit Insurance Corporation has raised concerns over deposit advances, a similar product offered by a handful of banks," writes American Banker's Victoria Finkle.
The CFPB has the authority to stop what it deems "unfair, deceptive, or abusive acts and practices." And "these products are a UDAAP lightning rod simply because they're aimed at vulnerable and less sophisticated customers," says Jo Ann Barefoot, a co-chair at consultancy Treliant Risk Advisors.
Does that mean such products are doomed? Actually it could be a good thing for bank’s venturing into this territory, according to industry observers.
"The silver lining of enforcement is that it separates out what you can do in a much cleaner and clearer way.” says Anand Raman, a partner at Skadden, Arps, Slate, Meagher & Flom. "If regulatory expectations are more clearly articulated, and there's a well-defined, and responsible way to do it, then you will see more banks deciding, 'OK, we're going to put a toe in the water.'"
"There's definitely a possibility that whatever they do could give an advantage to bank services," says Barefoot.
For the full piece see "Payday Loan Crackdown Could Have Big Upside for Banks" (may require subscription).