Who are the Bad News Banks?
Calling out payday predators and the banks that enable them
If you think short-term loans with rates up to 225% are only the product of those shady stores in town or sketchy online lenders, you’d be wrong. Instead, a number of online payday predators actively partner with “legitimate” FDIC-backed banks to prey on consumers.
Consumer advocates are aware of “six rogue banks fronting for high-cost non-bank consumer lenders, enabling loans up to 225% APR that are illegal for the non-bank lender to make directly.” Four of the banks are chartered in Utah: FinWise Bank, Capital Community Bank, First Electronic Bank and Transportation Alliance Bank (TAB Bank). The letter also cites Republic Bank & Trust of Kentucky and Lead Bank of Missouri. The high-cost lenders using banks to launder their loans include EasyPay Finance, Elevate Credit, OppLoans, the installment loan brand of the payday lender CashNetUSA, and the auto title lender LoanMart, among others.
David Clode/Unsplash
Two Predators Caught - Banking Partners Exposed
Advocates at the National Consumer Law Center applaud District of Columbia Attorney General Karl Racine’s announcement today that DC has reached a settlement with predatory rent-a-bank lender Elevate that requires it to abide by the District’s interest rate limits and to provide over $4 million in relief to wronged consumers.
“Companies that lend monies to District residents cannot charge more than 24% interest,” said AG Racine. “This settlement will put money back into the pockets of District consumers who were illegally overcharged. District consumers should be skeptical of any lender, including so-called fin-tech companies, that promise easy money without any financial consequence. The truth is often buried in the fine print. Interest rates like those involved in this settlement often exceed 100 percent and have a devastating impact on individuals who are in need of an honest and lawful loan. This resolution is part of my office’s continued focus on protecting DC residents from these predatory lenders.”
The Chicago Sun-Times reports that online lender OppFi engaged in a shadow lobbying campaign to overturn Illinois’ new Predatory Loan Prevention Act (PLPA) which caps interest rates on payday loans at 36%.
The Sun-Times article notes that “rent-a-bank” is a significant portion of OppFi’s business:
Across the country, OppFi is among the most vigorous users of the rent-a-bank strategy. Its website reports it does business that way in 31 states, including Indiana, besides making loans directly in four others, including Wisconsin.
A report from Accountable.us suggests that OppFi has been engaged in a shadow lobbying campaign that may violate Illinois state law. The purpose of that effort? Overturning the rate caps and allowing OppFi to charge its triple-digit interest rates to borrowers in Illinois.
Who else is violating state rate caps? What banks are enabling payday predators? If you’ve got a story, feel free to share it!