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Colorado Taking on Rent-a-Bank Lenders
A new Colorado law will effectively outlaw the practice of "rent-a-bank" lending that has allowed nonbank lenders to charge interest rates of up to 225% on short-term loans.
The law, signed by Gov. Jared Polis, removes Colorado from a federal law that allows lenders to exceed state interest rate caps by "renting" a charter from a bank located in a state where higher interests rates are allowed.
In recent years, a number of high-cost nonbank lenders – including American First Finance, EasyPay Finance, Elevate, the auto title lender LoanMart, Opportunity Financial (OppFi), and the installment loan brands of the payday lenders CashNetUSA and Check ‘n Go – have teamed up with banks in states like Utah that have no rate caps, claiming their loans are bank loans exempt from state interest rate limits.
On the Chatbot Doom Loop
Is a banking chatbot financial fraud? Not necessarily - but it is a failure of customer service that could create harms for consumers.
A new study by the Consumer Financial Protection Bureau (CFPB) suggests that the use of AI-powered chatbots by banks could be decreasing the quality of customer service and in some cases, causing consumer complaints to go unresolved.
The CFPB notes it has received numerous complaints about chatbot customer service and an inability to reach human help in order to answer questions or resolve problems with accounts. While the use of artificial intelligence can save banks money, customers often report a lower quality of service.
“To reduce costs, many financial institutions are integrating artificial intelligence technologies to steer people toward chatbots,” said CFPB Director Rohit Chopra. “A poorly deployed chatbot can lead to customer frustration, reduced trust, and even violations of the law.”
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