Bank of America will roll out a short-term loan program for customers who need cash fast starting in January 2021. The program, called Balance Assist, will charge customers a $5 fee and have a loan limit of $500. , according to a Herald Sun report.
The program is designed to help customers in immediate need of cash, but industry experts fear it could completely disrupt the short-term loan market.
The loans will only be available to Bank of America customers who have had a checking account with the bank for at least one year. Regardless of the size of the loan, the loan is expected to be repaid over 90 days in monthly installments. Customers are only allowed to have one loan at a time and can prepay the loan without penalty.
The program makes Bank of America one of the largest financial institutions to have a small dollar consumer loan program. Prior to the announcement, the only other banks that have similar programs are US Bank and KeyBank, according to the report.
These types of loans are generally dominated by consumer credit points and payday lenders, although regulators have urged banks to consider small-value loans, especially to help consumers affected by COVID-19.
“Customers were telling us they couldn’t make it from paycheck to paycheck. So it’s a bridge,” Steve Boland, head of retail at Bank of America, told the outlet. .