The Consumer Financial Protection Bureau on Wednesday issued areport on paydaylending that was critical of so-called deposit advance loans it said are offered by banks and creditunions.

Although credit union short-term, small-amount payday loan alternatives were notincluded in the report, the CFPB said it is also researching themand will publish results in an “overdraft study” in the next coupleof months.

The CFPB hasn't clearly stated it intends to write new rules forpayday lending products, but Director Richard Cordray said during apress call that “the purpose of all our outreach, research, andanalysis on these issues is to help us figure out the rightapproach to protect consumers and ensure that they will have accessto a small loan market that is fair, transparent, andcompetitive.”

As for deposit advance loans offered by depository institutions,the report said they are generally similar to storefront paydayloans “in structure, purpose, and the consumer protections concernsthey raise.”

The CFPB was particularly critical of the requirement thatborrowers repay the full amount in a balloon payment or givelenders access to direct deposit amounts or deposit accounts.

Access to deposits decreases risk and relaxes underwritingrequirements, but the report criticized lenders for not taking aborrower's ability to repay the loan outside of other debts andordinary living expenses into consideration.

The report said deposit advance product fees are generally about$10 for every $100 borrowed, an amount that would equate to 304%for $100 borrowed for a 12-day term.

Deposit advance products also lead to sustained use, the CFPBsaid. More than half of all users surveyed borrowed more than$3,000 per year, and 14% borrowed more than $9,000 annually. Theseborrowers typically have an outstanding balance at least ninemonths of the year and typically are indebted more than 40% of theyear.

In a nod to courtesy pay products, the report criticized lenderswho market payday alternatives as a way to avoid overdraft fees,saying 65% of deposit advance borrowers incur such fees anyway. Infact, the report said, the heaviest deposit advance borrowersproduce the most overdraft revenue for lenders.