On Thursday, federal banking regulators issued guidance stating that banks should determine whether borrowers can afford deposit advance loans before issuing them as well as take steps to stop borrowers from repeatedly taking them out. These loans share many of the characteristics of payday loans, but are linked directly to a borrower's bank account.

Borrowers generally take out a small amount of money (a recent report cited $180 as the median loan) and banks collect on the loans when a paycheck or benefit disbursement is directly deposited into the borrower's bank account. Regulators and consumer advocates have repeatedly pointed out the high fees associated with deposit advance loans, noting that they can pile up if borrowers repeatedly use the loans and cannot repay them. The standard fee is $10 for every $100 borrowed.

The Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency did not issue a rule, but the guidance may be enough to make banks consider whether they want to be involved with deposit advance loans, said Ballard Spahr partner Jeremy T. Rosenblum. He indicated that it would be very difficult for banks to ignore guidance from federal regulators.

Mr. Rosenblum also said that these loans are meeting a demand for small loans created by customers who need the money in the short run to cover immediate costs, such as rent and groceries. Limiting access to deposit advance loans could make the lives of these customers more difficult.

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