Wells Fargo, Small Banks Launch Short-Term Loan Products
Wells Fargo recently announced plans to offer a short-term credit product that it expects to be in the marketplace by the end of this year. The loans will provide amounts up to $500 at a flat rate that has not yet been determined, and will be repayable in three equal monthly installments.
“Core to Wells Fargo’s evolution is making sure we stay focused on our customers, first and foremost,” said Mary Mack, CEO of Wells Fargo Consumer and Small Business Banking, according to a company press release. “The enhancements we’re announcing today add to changes we’ve made previously and give our customers more choice and flexibility in meeting their needs.”
Along with short-term loan products, the bank is offering earlier access to direct deposits and a 24-hour grace period before being hit with any overdraft fees. Wells Fargo will also eliminate both non-sufficient funds (NSF) fees and transfer fees for customers enrolled in its Overdraft Protection program.
Wells Fargo’s new programs are built on services the bank initiated in the past few years; in 2020, it introduced Clear Access Banking, a consumer bank account with no overdraft fees, which now has more than 1.1 million customers. It introduced its Overdraft Rewind service in 2017, which ‘rewinds’ overdraft fees when a sufficient direct deposit is received by the next morning.
American Banker noted that several small banks have also started offering short-term credit products. OneUnited Bank in Boston introduced CashPlease, a program designed to help customers manage their cash-flow. The bank looks at applicants’ checking account activity instead of conducting credit checks and provides funds within four hours of the loan’s approval.
The CashPlease loan value ranges from $200 to $1,000 with an APR of 47 percent. Like Wells Fargo, the loan is payable in three monthly installments.
Though OneUnited does not have the deep pockets of larger banks, Teri Williams, the bank’s president and chief operation officer, said that OneUnited “won’t lose money [but] we didn’t implement this for the revenue. We tried to identify ways that won’t cost us money but will allow our customers to avoid practices that put them in the red in a way they can’t come back from.”