Bank of America (BoA) is muscling into the payday loan business, minus the sky-high fees, as the pandemic continues to upend the financial landscape, according to a post on the company website.
BoA on Thursday (Oct. 8) unveiled a new short-term loan program called Balance Assist aimed at customers in need of a few hundred dollars to make ends meet. Customers can apply for up to $500, in increments of $100, for a flat, $5 fee, with repayment in three equal installments over a three-month period.
The move comes as federal regulatory agencies urge banks and other lenders to pony up small loans to consumers to help them navigate the coronavirus-driven downturn.
BoA joins U.S. Bank and KeyBank, the only other major banks to offer such a small loan program, according to The Charlotte Observer.
“Balance Assist is the latest in a powerful set of transparent, easy-to-use solutions to help our clients budget, save, spend and borrow carefully and confidently,” said D. Steve Boland, president of Retail at Bank of America, said in the post. “People want the power to achieve financial freedom and stability, and are seeking simple, clear solutions and advice to help them along the way.”
BoA said in the post that it will begin offering the new, small-loan product in “select states” by January, followed by a larger rollout across the country early next year. The bank is limiting eligibility to customers who have had a BoA checking account for a year.
In March, five federal regulatory agencies — the Federal Reserve’s Board of Governors, Consumer Financial Protection Bureau (CFPB), Federal Deposit Insurance Corp. (FDIC), National Credit Union Administration and Office of the Comptroller of the Currency — urged bankers to begin offering such small-dollar loans to help consumers deal with temporary cash flow problems.
Federal regulators followed that up in May with an additional nudge to banks laying out detailed guidelines for such small loans.
