Issue Brief

Guidance on Deposit Advance Products

The safe small-dollar loans research project recently submitted comments to the FDIC and the Office of the Comptroller of the Currency (OCC) in regards to the guidance they proposed on deposit advance loans.

As the guidance recognizes, the essential issue is the borrower's ability to repay. Deposit advance loans, like payday loans offered by non-bank lenders, unrealistically require lump-sum repayments that far exceed most borrowers' financial capacity. The predictable result is that customers are unable to repay the loans and meet their other financial obligations, resulting in prolonged periods of renewing or re-borrowing. The product poses significant risk of harm to consumers, as the FDIC and OCC have noted, and it is based on a business model that is highly inconsistent with sound banking practices.

The Pew Charitable Trusts is a non-profit, research-based organization. Our interests include providing research and analysis to help ensure a safe and transparent marketplace for consumer financial services. Pew's safe small-dollar loans research project focuses on conducting research that identifies the needs, perceptions, and motivations of those who use payday, deposit advance and similar loan products, as well as the impacts of market practices and potential regulations. We hope this research will inform efforts to protect consumers from harmful practices and promote safe and transparent small-dollar credit.

The comments linked below are informed by in-depth research we have conducted over the past two years. This research includes a unique, nationally representative telephone survey of payday loan borrowers and more than a dozen focus groups with payday loan borrowers (including bank deposit advance customers) across the country. We have published two reports so far in our Payday Lending in America series, available at We would welcome the opportunity for further discussion at any time.

Nick Bourke,
Director, Safe Small-Dollar Loans Research Project

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