BofA launches short-term loans for some clients
- Bank of America offers short term loans to certain customers.
- The offer will be greeted by customers who need quick relief, as well as by regulators pushing banks to offer low-value loans, amid the pandemic.
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The loans will only be available to customers who have had a checking account with Bank of America (BofA) for more than a year, reports American Banker.
Offered as a program that BofA calls “Balance Assistance,” loans will be granted in installments 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 rocked the economy, about 40% of American adults said they would have a hard time paying for an unexpected $ 400 expense such as a car repair or a small medical bill, according to a survey. speak
and cited by American Banker. And with the status of stimulus negotiations constantly changing, any action banks can take unilaterally to provide quick financial relief to customers could have a disproportionately positive impact on customer satisfaction and loyalty.
Equilibrium assistance could also help BofA win favor with 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 joint statement encouraging banks to responsibly lend small dollars 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 that are usually due the next pay day after the loan is taken out.” By offering low-value loans at a fixed fee of $ 5, compared to 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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