- Bank of America offers short term loans to certain customers.
- The offer will be greeted by customers in need of quick relief, as well as by regulators pushing banks to offer low-value loans, amid the pandemic.
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Loans will only be available to customers who have had a checking account with Bank of America (BofA) for more than one year, American Banker reports.
Offered as a program called “Balance Assistance”, loans will be granted in increments of $ 100 up to a maximum of $ 500 and will incur a fixed fee of $ 5. Customers will repay the loans in three equal installments over a 90-day period. BofA plans to use data collected from applicants
as well as external credit information to determine eligibility.
The new offer could be particularly well received by customers affected by the coronavirus pandemic. The ability to get a quick cash injection, especially one that only comes with a flat $ 5 fee, is probably more important than ever.
Even before the crisis shaken economy, about 40% of U.S. adults said they’d have a hard time paying for an unexpected $ 400 expense like a car repair or a small medical bill, according to a survey by the
flux, any action banks can take unilaterally to bring quick financial relief to customers could have a disproportionately positive impact on customer satisfaction and loyalty.and cited by American Banker. And with the status of the stimulus negotiations in a constant state of
The equilibrium assistance could also help BofA gain the favor of financial regulators, who have pushed banks to offer alternatives to payday lenders. In March, federal regulators, including the Fed’s Board of Governors and the Office of the Comptroller of the Currency, issued a declaration encourage responsible lending of small dollars by banks in response to the pandemic.
If banks follow this recommendation, they can offer consumers an alternative to payday loans, which the FTC defines as “short-term, high-interest loans which are generally due on the consumer’s payday after the loan is taken out.” By offering low-value loans at a fixed fee of $ 5, versus an APY of 390% or more, as some payday lenders do, according to the FTC, BofA could fall in the good graces of powerful financial regulators who asked banks to step up.
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