CFPB Issues No-Action Letter on Bank’s Small-Dollar Loan Program

CFPB Issues No-Action Letter on Bank’s Small-Dollar Loan Program

The CFPB issued a no-action letter to Bank of America saying that the agency will never simply take enforcement action contrary to the bank associated with a small-dollar financing system. Particularly, the CFPB claimed so it will never take action under Sections 1031 (“Prohibiting Unfair, Deceptive, or Abusive Acts or Practices”) and 1036 (“Prohibited Acts”) of Dodd-Frank.

In line with the Bank of America no-action letter request, the lender’s small-dollar credit item (“Balance Assist”) is structured as a fixed-term, amortizing installment that is small-dollar become reimbursed over 3 months. The total amount Assist system would offer loans in increments of $100 as much as $500, having a $5 flat administrative charge, whatever the quantity lent, sufficient reason for no other administrative fees charged. Bank of America specified that the total amount Assist item will be provided simply to customers with Bank of America accounts that are checking inflows surpassing a predetermined threshold. Further, the lender will execute a credit post on prospective borrowers and will reject people that have a bad credit score.

The CFPB’s page provides that the no-action position can be obtained and then Bank of America and never to your other people. That is in keeping with the view indicated recently by Chair Heath P. Tarbert of this CFTC that a regulatory agency’s no-action position should always be certain to an entity that is individual.

The insurance policy foundation with this method of no-action roles is perhaps perhaps perhaps not apparent. The law should be the same for everyone as a general matter. The following is a recommendation: perhaps someone else relying on the page should publicly be required to reveal its identification, which may enable the regulator to help expand evaluate the knowledge or success of this no-action letter. In the event that intent behind the exclusivity is always to make up the original receiver for the work with getting the page, which will be reasonable, then that exclusivity duration may be time-capped in light for the basic presumption that what the law states should treat everybody else similarly.


The CFPB’s no-action page is very important for 2 reasons. First, the Bureau has given reasonably few letters that are no-action and therefore any guidance the agency provides through this program is significant. 2nd, the Bureau is blessing a short-term, small-dollar credit item from a big bank, suggesting that the Bureau thinks big finance institutions have actually a task to try out in supplying customers a substitute for high-cost types of credit, such as for example payday advances.


The CFPB’s letter provides that the no-action place can be obtained simply to Bank of America rather than to virtually any other people. This might be in line with the scene indicated recently by Chair Heath P. Tarbert for the CFTC that the regulatory agency’s no-action position ought to be certain to a specific entity.

The insurance policy foundation with this method of positions that are no-action maybe maybe not apparent. The law should be the same for everyone as a general matter. Listed here is a recommendation: possibly other people depending on the page should publicly be required to reveal its identity, which will enable the regulator to help expand evaluate the knowledge or success associated with the no-action page. Then that exclusivity period might be time-capped in light of the general presumption that the law should treat everyone equally if the purpose of the exclusivity is to compensate the initial recipient for its work in obtaining the letter, which is reasonable.

CFPB: online pay day loans hit customers with hidden danger

File picture drawn in 2010 programs neon indications illuminating a pay day loan company in Phoenix.

Customers whom seek out online loan providers for payday advances face hidden dangers of expensive banking costs and account closures, based on a federal analysis released Wednesday.

1 / 2 of the borrowers whom got the loans that are high-interest later had been struck with on average $185 in bank penalties for overdraft and non-sufficient funds costs once the loan providers presented more than one payment needs, the customer Financial Protection Bureau analysis discovered.

1 / 3rd of this borrowers who racked up a bank penalty finally faced involuntary account closures, the report additionally discovered.

On the web loan providers made duplicated debit efforts on borrowers’ reports, operating up extra bank charges when it comes to customers, although the efforts typically did not gather re payments, the research said.

“all these extra effects of a loan that is online be significant, and together they might impose big expenses, both concrete and intangible, which go far beyond the quantities paid entirely into the initial loan provider,” stated CFPB Director Richard Cordray.

Obama pushes lending that is payday in Alabama

The findings mark the buyer agency’s 3rd analysis associated with U.S. payday lending industry that offers the typically 300%-to-500%-interest-rate quick unsecured loans that numerous low-income borrowers count on to cover costs between one income check together with next. The CFPB intends to issue brand new laws for the loans later on this springtime, an endeavor endorsed because of the federal government.

CFPB analysts studied eighteen months of information through the Automated Clearing House. on line loan providers frequently make use of the economic community to deposit loan proceeds into borrowers’ checking accounts, in addition to to submit subsequent repayment demands.

If your debtor’s balance is low as soon as the on the web lender sends a payment demand, the lender can get back the request non-sufficient funds or accept the demand. In any event, the financial institution may charge the debtor overdraft or funds that are non-sufficient, in addition to late charges or came back re re payment costs.

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The analysis information revealed that the $185 in typical bank costs for the web cash advance borrowers included the average $97 tacked in for a primary unsuccessful debit demand. The borrowers additionally encountered a typical $50 charge whenever online loan providers made an extra debit demand after an unsuccessful work, and a typical $39 expense each time a lender submitted numerous re re payment needs in the exact same time.

Watchdog warns: pay day loan fees can trap you

The analysis found in all, 23% of accounts held by borrowers who got loans from online lenders were likely to be closed by the end of the 18-month sample period. The end result ended up being far greater than the 6% most most likely closure price for bank reports generally speaking, the report stated.

Significantly 50 % of all loan that is payday provide funds and seek repayments online, the CFPB stated. Payday loan providers that do not provide loan that is online weren’t contained in the analysis.

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