Hours after the CFPB released its final payday/auto title/high-rate installment loan rule on October 5, 2017, the OCC rescinded its guidance on deposit advance products. That guidance, entitled Supervisory Concerns and Expectations Regarding Deposit Advance Products published in November 2013 (OCC Bulletin 2013-40), and substantially identical guidance issued by the FDIC on the same day, had effectively precluded banks subject to OCC and FDIC supervision from offering deposit advance products. We were sharply critical of the prior guidance and applaud the OCC’s action.
Acting Comptroller Keith Noreika, in his statement about the OCC’s action, mentioned the CFPB and the risk of “potentially inconsistent regulatory direction and undue burden as they prepare to implement the requirements of the CFPB’s final [payday loan] rule.” The Acting Comptroller went further, explaining that the OCC guidance “may even hurt the very consumers it is intended to help, the most marginalized, unbanked and underbanked portions of our society.” The OCC, therefore, appears to invite banks to consider offering the product. It remains to be seen whether the FDIC will follow suit.
We think that national banks and federal savings banks (and perhaps other financial institutions) have an opportunity to structure deposit advance products that will fall outside the new CFPB rule, meet supervisory expectations, produce substantial revenues, and provide badly needed credit to consumers whose options may be sharply constrained by the CFPB rule.
We will continue to monitor any developments as they unfold.