Until 2013, a number of banking institutions were siphoning vast amounts yearly from consumer records through “direct deposit advance” — items that carried typical annualized interest levels all the way to 300%. Like storefront pay day loans, deposit advance had been marketed as an intermittent connection to a consumer’s payday that is next. But additionally like storefront pay day loans, these bank items caught borrowers in long-term, debilitating financial obligation.
But banking institutions destroyed desire for deposit advance by way of 2013 regulatory guidance instructing finance institutions to evaluate borrowers’ ability to settle their loans considering earnings and costs. Now, amid a tempest of deregulation in Washington, the banking industry is pressing regulators to allow them back to the payday lending game.