Regulatory Comment: Guidance on Deposit-Related Consumer Credit Products
The Pew Financial Security Portfolio, a part of the Pew Center on the States and the Pew Health Group, includes three projects that have conducted research relating to the deposit-related credit products discussed in the Office of the Comptroller of the Currency (OCC) Guidance. The Safe Checking in the Electronic Age Project has identified practices in consumer checking accounts, including overdraft services, which pose hidden risks to consumers. The Safe Banking Opportunities Project has studied the financial habits and patterns of low and moderate income families to determine what banking practices can encourage more Americans to participate in the financial mainstream and conversely, which drive families out of banking. The Safe Small Dollar Loans Research Project seeks to address predatory lending practices that stifle consumer access to transparent and safer forms of borrowing.
Based on the portfolio's research and analysis, the projects have 13 specific recommendations related to this request for comment:
- The OCC should make the fair treatment of customers a top priority in establishing guidance for national banks.
- The OCC should make clear that bank disclosures about overdraft services should include the fees for all available plans and should be presented in a simple, easy-to-understand format.
- The OCC should recommend that banks provide information about checking account terms, conditions and fees in a concise, easy-to-read format, similar to the Schumer Box used for credit cards.
- In order to ensure that overdraft fees do not comprise a large portion of bank revenue, the OCC should require that these fees are fair in comparison to the bank's costs in providing the overdraft loan.
- The OCC should require banks to post deposits and withdrawals in a fully disclosed, objective and neutral manner that does not maximize overdraft fees, such as in chronological order. The OCC should clarify its guidance to clearly state that banks should not post withdrawals from high to low or in random order.
- The OCC should consider guidelines on the volume of marketing materials banks use to solicit customers to enroll in fee-based overdraft services.
Deposit Advance Programs
- Given the serious concerns about loans that are repaid in a single pay period, the OCC should state clearly that banks should provide such repayment terms only in very narrow circumstances, if at all.
- The OCC should require banks to justify their determinations of what may be considered a “substantial” advance.
- The OCC's guidance should ensure that high-cost, short term deposit advances should only be provided to customers who do not qualify for other credit products.
- Loan repayment and any additional fees should not be permitted to overdraw a borrower's checking account.
- The OCC should clarify its guidance on payments banks should accept without an additional fee.
- The OCC should strengthen its guidance on affirmative opt-in requirements to accurately ensure customer consent.
- The OCC should advise banks to disclose the cost of deposit advance products accurately, by expressing the finance charge as an annual percentage rate calculated under the Truth in Lending Act and warning borrowers about the likelihood of renewal.