Banks are considering issuing so-called direct deposit loans in order to offset Durbin Amendment revenue losses.
These loans would provide a credit to a retail account for a hefty fee, according to FierceFinance.com. Banks may charge as much as $7.50 per $100 borrowed.
Financial experts predict that banks stand to lose tens of billions of dollars in revenue each year once the Durbin Amendment goes into effect in early Oct. and slashes the amount they receive in interchange fees.
Issuing direct deposit loans could play a significant role in the banks’ recovery strategies because many small customers have low balances on their checking accounts and would likely take advantage of the cash advance opportunity.
Payday lenders are seen as less reputable while some banks like Wells Fargo will have stricter guidelines.
Well Fargo said it would cap the loan at half of a consumer's account or at $500, according to FierceFinance.com.
The bank also said it would only let borrowers take out a loan for six months in a row before they are forced to take one month off from borrowing.
The fees banks will charge would be about half of what payday lenders charge.
The payday loans business, however, is still strong.