In the state of Iowa, a bank was recently told by federal regulators that it could no longer make short-term payday loans or tax refund loans to its customers who have prepaid debit cards. The regulators said that issuing such loans to these types of customers violates the federal unfair or deceptive practice laws.
MetaBank was contacted by the Office of Thrift Supervision, the federal government's bank regulator, and told to stop offering such lines of credit through its iAdvance program immediately. The program offered short-term, high interest loans to customers who had prepaid debit cards. Aside from offering payday loans, the program was also used by customers to borrow money against their anticipated tax refunds.
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