CBA PRESIDENT & CEO RICHARD SEARCH, TESTIMONY ‘DEPOSIT ADVANCE PRODUCTS’

CUSTOMER BANKERS ASSOCIATION

PRIOR TO THE UNITED STATES OF AMERICA SENATE SPECIAL COMMITTEE ON AGING

“PAYDAY LOANS: SHORT-TERM SOLUTION OR LONG-TERM PROBLEM?”

Chairman Nelson, Ranking Member Collins and people of the Committee, many thanks for the chance to talk about the short-term liquidity requirements of US customers and bank deposit advance services and products. I am Richard search and I also have always been President and CEO regarding the Consumer

Bankers Association (“CBA”). 1

Presently, a calculated 76% of all of the Americans reside paycheck to paycheck. 2 The economy has remained stagnant making customers with less pillow for emergencies, strained credit scores, and less credit choices, making usage of fairly priced short-term liquidity items all that more important. Different entry-level credit items exist to satisfy an array of requirements, including conventional charge cards, unsecured loans, as well as other kinds of credit. Unfortuitously, numerous customers don’t be eligible for them. In reaction, some banking institutions have opted for to supply a deposit advance item to meet up their clients’ need and interest in short-term, small-dollar credit. 3

Deposit advance services and products, offered today by only six banks, provide a critical short-term, smalldollar credit need for customers that do perhaps not be eligible for old-fashioned credit services and products. These items aren’t loans, these are typically credit lines (“LOC”) paid back immediately from the recurring deposit that is direct. While specific items differ, the most higher level is limited by the lower of the cap (typically $500) or a share regarding the average payment that is recurringe.g. 50 percent). Deposit advances providers often charge an obvious, effortlessly comprehended charge based on a portion of this loan.

Executive Overview

• Deposit advance products are small-dollar personal lines of credit available and then bank clients with established checking account relationships in good standing. They’re not loans that are payday. These items integrate features such as for example maximum loan size and cool down durations to guard customers from reliance regarding the product.

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• There is certainly high consumer interest in viable short-term, little dollar credit. Deposit advance items are built to properly, quickly and conveniently fulfill this demand. Customers realize and like bank deposit advance items. These items have obtained customer that is positive and carry few complaints.

• Deposit advance items would not have an impact that is disparate seniors. Total consumer usage corresponds approximately with all the populace of seniors in the usa.

• Deposit advance items have already been made available from depository organizations for several years and are also intensely managed for customer security and security and soundness issues. The potential risks to customers and supervised institutions recently cited by federal prudential regulators are overstated and coordination that is regulatory highly advised going forward. Deposit advance items usually do not provide soundness and safety dangers to your organizations that provide them. These items have actually integrated settings to restrict usage, are not earnestly marketed, and supply clear and conspicuous disclosures.

In testimony before a home Subcommittee, Senator Elizabeth Warren, then your Advisor that is special to Secretary associated with the Treasury for the Consumer Financial Protection Bureau (“CFPB”), said,

“consumers wish to know the expenses up-front and don’t desire to be blindsided by concealed costs, rate of interest modifications, or re payment shocks. Informed decision-making allows customers to push the financial marketplace making sure that providers offer items that meet customer needs and choices.” 4 As outlined within our testimony today, CBA thinks the banking institutions providing deposit advance items have actually followed to those terms within the strictest feeling by giving fairly priced items with very clear terms, meeting the need of U.S. customers.