Advocates Call for Federal Regulation to Prevent Predatory Lending

Consumer group calls out "rent-a-bank" schemes, asks FDIC to take action

A national consumer advocacy group is calling on a key federal regulator to take steps to address predatory lending schemes that allow online lenders to evade state interest rate caps on small-dollar loans.

The National Consumer Law Center (NCLC) says these so-called "rent-a-bank" schemes can result in consumers paying interest rates approaching 200%.

One recent example is EasyPay Finance, a company that makes loans for auto repairs and pet purchases and care, among other things. That company has now been ordered to pay a $215,000 fine for charging illegal interest rates to consumers in Washington, DC.

NCLC applauded the DC effort as well as actions in other states and said national action is needed in order to protect consumers across the country.

“TAB Bank has been fronting for EasyPay Finance to facilitate predatory puppy loans, auto repair loans, and furniture loans using deceptive and unlawful tactics leading to astronomical interest rates up to 189% in violation of interest rate laws,” said Lauren Saunders, associate director of the National Consumer Law Center. “DC’s latest action against EasyPay and earlier lawsuits against OppFi and Elevate have sent a message and pushed predatory rent-a-bank lenders out of DC, showing how states can take a stand to protect their interest rate laws against evasions.” 

In April, Colorado entered into a settlement with EasyPay that forced the loans out of that state, and last December Iowa did so in an agreement with TAB Bank. Iowa had an advantage, as it is the only state that has opted out of a federal law that allows out-of-state, state-chartered banks to ignore state interest rate laws across the country, though the Colorado governor just signed a bill opting Colorado out as well.

“Actions by DC and states are important, but ultimately the FDIC needs to stop a handful of rogue banks from fronting for predatory lenders across the country,” Saunders added.

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