Rent-A-Bank

The return of rent-a-bank lending is the most serious threat in 20 years to states' ability to protect their residents from predatory lending. Proposed rules would make it easier for high-cost lenders to launder their loans through banks.

What is Rent-A-Bank?

 

Payday lenders and online consumer lenders are starting to make usurious loans up to 160% in states where those rates are illegal by using banks, which are not subject to state rate caps, as a fig leaf. Banks have little to do with the loans, which they immediately sell.

 

Bank regulators shut down these schemes in the early 2000s, but two state-chartered banks, FinWiseBank and Republic Bank and Trust, both regulated by the FDIC, are again helping payday lenders evade the law in 28 states & DC

 

NCLC issue brief on rent-a-bank lending and threat to usury laws

FDIC / OCC Proposal Would Encourage Rent-a-Bank Predatory Lending | NCLC, December 2019

 

This issue brief explains the business arrangements between banks and lenders and legal issues with rent-a-bank lending. And it highlights the huge threat that an FDIC/OCC proposal poses to states' historic ability to limit interest rates and to protect their residents from predatory lending.

 

Comments on the OCC proposal are due Jan 21, 2020 and on the FDIC proposal are due Feb 4, 2020.

 

 

 

Rent-A-Bank In The News

 

California made triple-digit interest illegal on these loans. Lenders have found a loophole

by Hannah Wiley | The Sacramento Bee, December 18, 2019

 

Trump’s Bank Regulators Open the Door to More Predatory Lending by David Dayen | The American Prospect, November 19, 2019

"A new proposed rule would allow ‘rent-a-bank’ schemes that could permit unlimited interest rates on loans as long as they come via a chartered bank."

 

Trump Administration Declares Open Season on Consumers for Subprime Lenders
by Adam Levitin | Credit Slips, November 18, 2019

"The Trump administration has just proposed a rule that declares open season on consumers for subprime lenders. The Office of Comptroller of the Currency and the Federal Deposit Insurance Corporation (on whose board the CFPB Director serves) have released parallel proposed rulemakings that will effectively allowing subprime consumer lending that is not subject to any interest rate regulation, including by unlicensed lenders."

 

How Some Online Lenders Dodge State Laws To Charge Triple Digit Interest Rates

November 12, 2019 | NPR, All Things Considered

"Online lenders charging triple digit interest rates are dodging state laws banning such loans. The money is routed through banks that aren't regulated at the state level to get around the rules."