- Posted February 1, 2014 by
Two Banks Stop Offering Deposit Advance
Customers who bank with Wells Fargo and U.S. Bank who have relied on deposit advance products to pay for emergency bills will soon have to start looking for another way to cover those bills. The two banks have announced that they will no longer offer these loans because many view them as small loans similar to payday advances.
The announcement from Wells Fargo indicated that it isn't going to offer any products in place of these loans, which were said to have annual interest rates of over 200%. The banking giant said that it will discontinue offering the service to new account holders as of today, Feb. 1, 2014. Current account holders will still be able to use the service until the middle of the year.
U.S. Bank has announced that it is considering offering an alternative service, but it hasn't yet announced what that might be. As of Jan. 31, 2014, new customers won't be offered the service. People who currently have the service can continue to use it through May 30, 2014.
Two other banks have also recently said they are doing away with these types of products. Regions Bank in Birmingham and Fifth Third Bank in Cincinnati announced within the past week that they were getting rid of these products.
Back in November of 2013, the FDIC and OCC released a statement saying that these types of loans posed significant risks to consumers. Banks were called upon to make loans that consumers are able to repay without significant difficulty.
For people who have relied on these deposit advances from banks will likely need to find reputable payday loan companies that offer small loans. It is important for consumers to realize that these loans are meant to be used for emergencies and shouldn't be used to fund luxuries. The due dates come up quickly, and only about 65% of people who take out payday loans are unable to pay them back on time.