Banks are under pressure to uncover new ways of maintaining profits from customer checking accounts under new, stricter regulations on money-yielding sources such as overdraft fees, the Associated Press reports.


Some banks are attempting to procure extra funds using predatory methods similar to payday loans, which typically result in high interest rates, short repayment periods and the potential to trap customers in a recurring cycle of debt.

These banks, such as Wells Fargo, call the methods "direct deposit loans" as a way to distance themselves from the stigma of payday lending.

Direct deposit loans differ from payday loans because customers can only borrow up to half of their direct deposit amount, maxing out at $500. They can continue the cycle for up to six months until they're cut off for a "cooling period" of one month.

"When you're allowed to be indebted for six billing cycles in a row, that's not a short-term loan," Uriah King, vice president of state policy at the Center for Responsible Lending, told the media outlet.

Wells Fargo has been offering direct deposit loans in Western states since 1994, the Baltimore Sun reports. However, a converted Wachovia branch with the loan option will open in Maryland next month.