CFPB grants secure harbor to Financial institution of America for small-dollar loans

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Financial institution of America grew to become the primary main financial institution to obtain a “no-action letter” from the Shopper Monetary Safety Bureau overlaying small-dollar loans.

The CFPB introduced Thursday that it accredited BofA’s no-action letter utility that provides the the Charlotte, N.C., financial institution elevated certainty that it’ll not obtain a supervisory or enforcement motion for a credit score product that it plans to supply subsequent 12 months.

BofA stated final month that it plans to roll out a short-term, payday mortgage starting in January that enables checking account prospects to borrow as much as $500 for a flat charge of $5. Clients should have a checking account for a minimum of a 12 months and repay the mortgage in three, equal month-to-month installments over a 90-day interval.

The transfer follows guidance issued by prudential regulators in Might encouraging banks to embrace small-dollar lending to assist customers damage by the coronavirus pandemic.

Bank of America said last month that it plans to roll out a short-term, payday loan beginning in January that allows checking account customers to borrow up to $500 for a flat fee of $5.

Financial institution of America stated final month that it plans to roll out a short-term, payday mortgage starting in January that enables checking account prospects to borrow as much as $500 for a flat charge of $5.

Bloomberg Information

“The Bureau accredited the [no-action letter] Template to additional competitors within the small-dollar lending house, which fosters entry to credit score whereas together with necessary protections for customers who search small-dollar mortgage merchandise,” the CFPB stated in a press launch.

Financial institution of America’s utility to the CFPB was primarily based on a template requested by the Bank Policy Institute, a Washington commerce group. The appliance got here after the CFPB launched an accredited template in Might that banks might use in looking for a “no-action letter” for providing loans or traces of credit score for quantities of as much as $2,500.

Whereas the CFPB doesn’t endorse particular merchandise or suppliers, the template gives parameters that the bureau has accredited. Corporations can use the templates to get speedy approval of their very own no-action letters.

The CFPB additionally stated that it had submitted a Paperwork Discount Act discover to the Workplace of the Federal Register associated to the testing of client disclosures. In July, when the CFPB launched its payday lending rule, the bureau stated it was attempting to establish data that may very well be disclosed to customers throughout the small-dollar lending course of to permit them to make knowledgeable selections.

“The testing of various client disclosures helps the Bureau’s dedication to making sure that customers have the data they should perceive the small greenback merchandise obtainable to them to allow them to make the alternatives which can be finest for them and their private circumstances,” the bureau stated in a press launch.