The Consumer Financial Protection Bureau has issued a no-action letter to Bank of America, N.A., for a proposed small-dollar credit product.
Bank of America’s “Balance Assist” product would offer an affordable solution for short term liquidity needs, provide a streamlined digital-only small-dollar credit product, and expand consumer access to credit, the bank said in its request letter. It would be an amortizing small-dollar installment loan paid in fixed minimum payments over a three-month term. Bank of America plans to offer it at $100 increments, up to $500, with a $5 flat fee and an APR below 36 percent.
Charlotte, N.C.-based Bank of America’s NAL application is based on the NAL template issued by the CFPB on May 22 in response to an application from the Bank Policy Institute. BPI sought an NAL template that could serve as the basis for NAL applications by BPI members and other deposit-taking institutions that intend to offer certain small-dollar credit products.
The bureau approved the NAL Template to further competition in the small-dollar lending space, aiming to foster access to credit while including important protections for consumers who seek small-dollar loan products.
The CFPB also submitted a Paperwork Reduction Act notice regarding its research efforts to identify information that could be disclosed to consumers during the payday loan process to help them make better-informed decisions. Those efforts will build on academic research to “create disclosures that present key information clearly and effectively,” the agency said.
Comments on the proposal must be received by Dec. 14.