Bank of America Announces Plans to Offer Short-Term Loans
Last week, Bank of America Corp. unveiled plans to offer short-term loans to customers that have had checking accounts for more than a year. Under the new plan, customers can borrow up to $500 for a flat $5 fee; the advance would be available in increments of $100 and must be paid back in three installments over 90 days.
“Customers have told us they have that need for liquidity,” said Kevin Condon, senior vice president for small-business products and consumer deposit at Bank of America. “We want them to stay within mainstream banking to do that.”
A pre-pandemic Federal Reserve survey found that about 40 percent of Americans would struggle to pay an unexpected $400 expense. The COVID-19 pandemic has caused increased unemployment that has left many struggling to meet their obligations.
Regulators released guidance in May encouraging lenders to participate in small-dollar lending programs and help consumers with unforeseen needs. According to Bloomberg, regulators said that the loans’ structure should allow borrowers to repay loans in a “reasonable time frame rather than reborrowing, rollovers, or immediate collectability in the event of default.”
Bank of America plans to report borrowers’ repayment behavior under the program, called Balance Assist, to major credit bureaus. Balance Assist will follow the bank’s SafeBalance Banking account, which began in 2014 and removed overdraft fees, gaining more than 2 million clients.
“This is part of the journey that we’ve been on for quite some time,” said Steve Boland, Bank of America’s retail president. “I would hope that we’ll see really favorable reactions from all key constituents as they hear about the solution.”