Checking account Advance

Wells Fargo and U.S. Bank had previously said they were reviewing guidance released in late November from the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. that outlined standards that banks should meet if they choose to offer deposit advances to consumers.

Some had complained that the guidelines would basically force banks to abandon deposit advance products. The guidelines include such things as having banks assess a consumer's ability to repay the loans before authorizing approval, or having banks institute a cooling-off period, during which a bank should wait one payment cycle - usually a month - after one deposit advance is repaid before another advance is offered.

U.S. Bank said it will quit offering its Checking Account Advance product to new customers at the end of this month. The product will be completely discontinued by May 30. "Customers who have an outstanding balance at that time will be offered extended repayment terms, " it said in a press release.

Wells Fargo will stop offering its deposit advance program to any consumer checking accounts opened Feb. 1, 2014, or later. It said it is finalizing a transition plan for current customers using the program, saying current customers will be able to continue using the service until mid-year.

U.S. Bank mentioned the regulators' guidelines in its announcement, but Wells Fargo did not, saying only that discontinuation of the service is not expected to have a material impact on the company.

With deposit advances, the bank fronts the borrower an advance on his or her next direct deposit. Then, the next time sufficient funds are deposited into the borrower's account, the bank takes back its money, along with a fee.

Surveys have shown that consumers like deposit advances and similar payday-loan offerings. But consumer advocacy groups and some lawmakers have called for an end to these products, saying they are predatory and can trap consumers in a debt cycle.

Interesting facts

• GAP insurance is also known as Guaranteed Auto Protection or Guaranteed Asset Protection and simply known as GAP within the North American financial industry. GAP is the difference between the actual cash value of a vehicle minus all perils deductible (if at fault) and liens (especially in Canada) and the lease or loan payout minus financed...