CBA Joint Comment to FDIC on Deposit Advance Product Proposed Guidance

Dear Mr. Feldman:
This comment letter is submitted by the Consumer Bankers Association, The Financial Services Roundtable , and The Clearing House (collectively the “Associations”) in response to proposed supervisory guidance (“Proposal”) regarding deposit advance products, which was published in the Federal Register on April 30, 2013, by the Federal Deposit Insurance Corporation (“FDIC” or “Agency”). The Associations strongly support effective consumer protections and, specifically, the principles of choice, transparency and fairness in customer relationships. We appreciate the opportunity to share our suggestions and work with the FDIC, and others, as it considers the issues related to deposit advance products.
The FDIC is proposing to clarify the application of safe and sound banking practices and consumer protection in connection with bank-offered deposit advance products. The Proposal details the principles the FDIC expects supervised financial institutions to follow in connection with deposit advance products in order to manage the reputational, compliance, legal and credit risks, which the FDIC perceives to be associated with these products. Specifically, the guidance seeks to address a number of issues, including eligibility standards, disclosures, product limitations, monitoring and risk assessments, and management oversight.

There has always been a need for small-dollar, short-term credit and, historically, the FDIC and other prudential regulators have encouraged depository institutions to meet this particular consumer credit need. Some banks have chosen to offer a deposit advance product as a means of meeting their customers’ need for short term small dollar lending.4 These providers have responded by developing products carefully designed to ensure strong safeguards at reasonable prices. As discussed below, bank-offered deposit advance programs are well understood and well-liked by consumers who use them, and are an important source of credit for consumers’ short-term liquidity needs. Accordingly, we urge the FDIC to withdraw the proposed guidance and to work with all stakeholders including consumers, depository institutions, other prudential regulators and the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) to develop a sound data-based foundation for a comprehensive supervisory approach that avoids unintended adverse impact on both consumers and banks.

To read the full Comment Letter, download the PDF.