"Balance Assist is the latest in a powerful set of transparent, easy-to-use solutions to help our clients budget, save, spend and borrow carefully and confidently," D. Steve Boland, president of retail at Bank of America, said. "People want the power to achieve financial freedom and stability, and are seeking simple, clear solutions and advice to help them along the way."

Consumer groups have encouraged banks and credit unions to offer small-dollar loans at reasonable prices to prevent consumers from being trapped in a cycle of debt with predatory lenders.

Alex Horowitz, a senior research officer with The Pew Charitable Trusts' consumer finance project, called Bank of America's Balance Assist loans "a positive development." It offers a low price for that type of loan, especially compared with the typical payday loans with APRs of about 390%.

However, he said the limitation to customers with checking accounts for one year will limit the number of people the bank can help. Banks typically limit small-dollar loans to customers after six months and federal credit unions have no waiting period.

"With loans like this, as long as we're talking double-digit APRs and major cost savings for consumers over non-bank loans, the price is less important than the accessibility," he said. "What I'll be watching for in a program like this is does it reach people who would otherwise use more expensive products, like payday loans, like title loans, like overdrafts."

In the wake of the Great Recession, the NCUA launched its Payday Alternative Loan program for federal credit unions. It allows credit unions to charge up to 28% interest plus application fees up to $20 for loans up to $2,000 for terms up to 12 months. PAL loans can be made as soon as the person becomes a member.

NCUA data showed PAL originations in the three months ending June 30 were $33.2 million, 24.5% less than originations in 2019's second quarter, and the first decline since a 5.6% drop in 2018's first quarter.

Wescom Central Credit Union of Pasadena, Calif. ($4.5 billion, 195,849 members) quietly launched "Quick Assist" loans in May 2019. It offers zero-interest loans of $200 to $500 to established members — those who have had accounts for at least 90 days and at least $400 per month in direct deposits.

So far, the credit union has funded $287,000 through more than 600 loans. Originally, the credit union charged a $19 fee, but has waived it since April as one of its measures to help members during the pandemic, according to Linda Emmons, consumer loan operations manager.

"We've seen an increase in members with COVID-related expenses," Emmons said.

"But we are still seeing members who just have unexpected expenses: They get a flat tire or an appliance goes out," she said. "These unexpected expenses can create some challenging times for people who don't have robust savings accounts."

Under Wescom's program, a member can have only one Quick Assist loan out at a time, and can take out no more than three every six months. So far, less than a third of the loans have been to repeat borrowers, Emmons said.