Bank of America to get into small dollar lending

FILE PHOTO: A Bank of America building is seen in Los Angeles, California, U.S., May 6, 2019. REUTERS/Lucy Nicholson - RC11E7E5F470

(Reuters) - Bank of America Corp BAC.N said on Thursday it was launching a new low-cost loan product for checking customers who may be pressed for cash.

Balance Assist, which will be available beginning in January, allows clients to borrow up to $500 for a flat $5 fee, and repay the amount over a three-month period. Customers need to have a checking account with the bank for at least one year to be eligible for the loan.

Earlier this year U.S. regulators urged banks to strongly consider extending short-term, small-dollar loans to struggling people and businesses to help them make ends meet during the coronavirus pandemic. Banks largely abandoned the practice in recent years amid regulatory scrutiny.

“Financial health has never been more challenging for the millions of consumers who experience short-term cash gaps due to income volatility or unexpected expenses,” said Jennifer Tescher, CEO of Financial Health Network. “We need more institutions to offer small-dollar credit, and so it is encouraging that Bank of America has developed an alternative to overdraft and payday loans that is safe, transparent, and affordable, with the real potential to advance financial health.”

Reporting by Imani Moise; Editing by Steve Orlofsky