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Bank of America will be able to offer small loans to customers under certain guidelines without facing enforcement actions from the Consumer Financial Protection Bureau.

The CFPB granted a no-action letter (NAL) to Bank of America yesterday for a small-dollar credit product. Issued under the CFPB’s updated NAL policy from 2019, the NAL provides increased regulatory certainty that the CFPB “will not bring a supervisory or enforcement action against a company for providing a product or service under certain facts and circumstances,” the CFPB said in a statement.

Following the Great Recession, regulatory concerns kept many institutions from offering small-dollar loans, opening up opportunities for high-interest payday and hard money lenders.

Federal bank regulators in March encouraged financial institutions to offer responsible small-dollar lending to help individuals dealing with financial hardships related to the coronavirus, noting that institutions could receive Community Reinvestment Act credit for these loans.

The CFPB had approved a template in May for banks to use when applying for NALs for small-dollar loans. The template had been submitted by the advocacy group Bank Policy Institute to “establish the underlying criteria and operating guardrails for a bank to offer small-dollar loan products for amounts of up to $2,500 in the form of an installment loan or line of credit product,” the Bank Policy Institute said in a statement in May.

The CFPB said it approved the NAL Template to allow for more competition in the small-dollar lending space, while also protecting consumers who seek these loan products.

The NAL applies only to Bank of America and the product it plans to offer, Balance Assist. In its application for the NAL, BofA said the product would have a three-month term and be offered in $100 increments up to $500. The customer will be charged a $5 fee for the loan. The APR, including the fee, will not exceed 36 percent. BofA noted in its application that payday loans can carry APRs up to 300 to 500 percent.