Why Too-Big-to-Fail Banks Have Regulators Angry Again

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Big banks being under fire is nothing new. But recently, the FDIC took a critical look at one practice that Bank of America  (NYSE: BAC  ) , JPMorgan Chase  (NYSE: JPM  ) , Wells Fargo  (NYSE: WFC  ) , and several other banks all use to offer short-term credit to customers.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, discusses deposit advance products and how regulators are trying to crack down on them. As Dan explains, deposit advances look a lot like payday loans, where banks extend credit in exchange for the promise to get their money back when customers receive their next direct deposits. Big banks have offered deposit advance, as have regionals such as Regions Financial  (NYSE: RF  ) and US Bancorp  (NYSE: USB  ) .

But as Dan describes, the FDIC has noted that these products have produced some of the same bad effects as payday loans, including the trap of repeatedly using them and their high fees. Meanwhile, bank advocates note that preventing big banks from doing deposit advance will simply drive those customers back toward traditional payday lenders.

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Read/Post Comments (3) | Recommend This Article (2)

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  • Report this Comment On December 01, 2013, at 12:34 AM, zantor2 wrote:

    Of course the BIG banks are delving into the high interest (usury level%) where they can gouge those who can least afford it.

    There is no end to the GREED of corporate america. I have no problem with any corporation a reasonable return on investment, i DO invest in many corporate stocks. BUT why do the AMERICAN companies always seem to be at the forefront of any SCHEME that basically disadvantages people.

    WHY do they feel the need to operate SCAMS and that is what payday loans/advance are. IF they would do it for a reasonable fee/interest that would be fine. How about the same as a standard VISA card interest and only on a daily equivalent basis. and a small processing fee = maybe 5% flat.

    Why do they feel the need to go to rates that end up being 200% for a small amount to repay in 15 to 30 days. AND they should use industry standards for even offering the loans. NO loans to people without good income to debt ratios. STOP trying ruin the poor people.

  • Report this Comment On December 01, 2013, at 2:33 AM, Squirrel7y6g wrote:

    Senator Obama voted for the TARP bailout. Candidate Obama got more Wall St. donations than any other candidate. So why did the Occupiers vote for Obama for President????? Obama supporters will go hysterical over this well sourced list of 462 examples of his lying, lawbreaking, corruption, cronyism, etc.

  • Report this Comment On December 01, 2013, at 5:55 AM, Squirrel7y6g wrote:

    Obama supporters will go hysterical over this well sourced list of 462 examples of his lying, lawbreaking, corruption, cronyism, etc.

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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