“A national 36% interest rate cap, including all fees, is the simplest way to stop predatory lending and ensure that lenders make responsible loans that borrowers can afford to repay,” said National Consumer Law Center Associate Director Lauren Saunders. “Senator Reed’s bill will prevent predatory lenders from using junk fees to obscure the true price of loans and put borrowers in a debt trap.”  

Caps on interest rates and junk fees are the primary vehicle states can use to protect consumers from predatory lending. The 36% interest rate limit has become the broadly accepted dividing line between responsible lending and destructive credit that harms lives and destroys financial inclusion.

“We commend Senator Reed for introducing legislation that would protect American families from the financial devastation caused by payday and other predatory lenders,” said Mitria Spotser, vice president and director of federal policy at the Center for Responsible Lending. “The Predatory Lending Elimination Act would ensure that the same 36 percent interest rate cap on loans to military servicemembers and their families extends to all Americans.”

A 36% interest rate limit is broadly supported by people across the political spectrum, and strong majorities in both red and blue states have voted to enact rate limits in recent years.

“For too long, predatory lenders have taken advantage of the lack of a uniform national rate cap to evade state interest rate laws through rent-a-bank schemes,” said Adam Rust, Director of Financial Services for the Consumer Federation of America. “A single and straightforward all-in rate cap spells an end to that loophole. It will be a huge win for consumers.”

Forty-five states and the District of Columbia currently cap interest rates and loan fees for at least some consumer installment loans, depending on the size of the loan, and about half of the states prohibit high-cost, short-term payday loans. But while some states have cracked down on evasions, others are allowing lenders to pile on more junk fees or to charge high, unaffordable rates that trap low-income consumers in never-ending debt. Lenders have also exploited the lack of rate caps for banks to use “rent-a-bank” schemes to evade state interest rate laws.

“Families saddled with predatory loans are unable to afford basic living expenses, are subject to vehicle repossessions, abusive debt collections, bank account closures, bankruptcy, and other financial harm,” said Kimberly Fountain, consumer financial justice field manager for Americans for Financial Reform. “Americans for Financial Reform applaud Senator Reed’s bill to give America’s most vulnerable communities a fair interest rate cap.”

The Predatory Lending Elimination Act covers all types of lenders, including banks, and would eliminate high-cost, predatory payday loans, auto-title loans, and similar forms of toxic credit across the nation by:

• Preventing hidden junk fees and loopholes.
• Establishing a simple, common sense limit that is broadly supported by the public on a bipartisan basis.
• Simplifying compliance by adopting a standard that lenders already understand and use.
• Upholding the ability of states to adopt stronger protections as needed, such as lower rates for larger loans.

The Act does not apply to residential mortgages, car purchase loans, or loans by federal credit unions, which are already subject to an 18% interest rate cap for most loans and a 28% cap for payday alternative loans.

The post Senate Introduces 36% Rate Cap Bill to Curb High-Cost Loans, Junk Fees appeared first on Consumer Federation of America.

“Thousands of complaints against these banks reveal predatory lending practices and potential violations of the law that strongly support downgrading the Community Reinvestment Act ratings of CC Bank, First Electronic Bank and Republic Bank & Trust,” said Lauren Saunders, associate director at the National Consumer Law Center. “Loans that borrowers can’t afford to repay, with interest rates in excess of state limits, do not meet the needs of communities as required by the CRA.”

The CRA, or Community Reinvestment Act, is a 1977 law intended to encourage insured banks and thrifts to meet local credit needs, including those of low- and moderate-income neighborhoods, consistent with safe and sound operations. 

“High-cost lending is fundamentally unsafe,” said Adam Rust, senior policy advisor at the National Community Reinvestment Coalition. “The FDIC must conclude that rather than serving the needs and conveniences of the public as prescribed by the CRA, banks engaged in predatory rent-a-bank lending like CC Bank, First Electronic Bank and Republic Bank & Trust are undermining the needs of the public.” 

Earlier this month, advocates sent a letter urging the FDIC to downgrade another Utah bank, FinWise Bank, for facilitating predatory puppy loans and other deceptive, high-cost loans through retail stores for pets, furniture, auto repairs and appliances. That letter came on the heels of news that the FDIC had downgraded yet another Utah-based bank, Transportation Alliance Bank (TAB Bank), over similar claims. TAB Bank’s CRA rating dropped to “needs to improve,” a low rating that few banks get. 

The groups also urged the Utah (CC Bank & First Electronic Bank) and Kentucky (Republic Bank & Trust) bank regulators to stop their banks from helping predatory lenders evade the law.

“Communities don’t need high-cost credit that extracts wealth and crushes borrowers with debt,” said Nadine Chabrier, senior policy and litigation counsel at the Center for Responsible Lending. “The FDIC’s assessment of these rent-a-banks must take into account the full scope of their business practices, including arrangements to facilitate loans in excess of state interest rate caps”

Each of the non-bank lenders involved with the Utah and Kentucky banks faces complaints over extensive consumer harm and potential legal violations. LoanMart, for example, faced scrutiny by California regulators that led to an extensive pause on its lending in the state. Similarly, Elevate and OppFi have faced state government action and private litigation, with OppFi agreeing to pay $2 million to the District of Columbia and to stop usurious lending in the District.

The three banks targeted in the letter are rogue banks that front for predatory lenders. While most states have interest rate limits to stop predatory lending, predatory lenders evade state laws by laundering their loans through banks, which are exempt from state rate caps. 

“Banks like Capital Community, First Electronic, and Republic must be stopped from fronting for loans that exceed state interest rate limits across the country,” said Rachel Gittleman, financial services outreach manager at Consumer Federation of America. “A downgrade will signal to banks that the FDIC will hold them accountable for their lending partners’ conduct.” 

The comments describe how the three banks’ partnerships with Elevate, LoanMart, NetCredit, OppFi, Check ‘n Go and others have generated hundreds if not thousands of complaints to the Consumer Financial Protection Bureau (CFPB) concerning: 

• Lack of transparency around high interest rates
• Unaffordable loans that borrowers are unable to repay
• Receiving loans that they never applied for and identity theft
• Improper debt collection tactics, including collecting debt not owed, failure to validate debts, harassment and abuse
• Credit reporting problems, including incorrect information and failure to respond to disputes and errors

Under FDIC Guidance, banks are responsible for risks that arise from third-party relationships to the same extent as if the activity were handled by the institution.

“Rent-a-bank schemes erase efforts by states to protect residents from predatory lenders,” said Kimberly Fountain, consumer financial justice organizer at Americans for Financial Reform. “The FDIC can protect consumers, particularly low-to-middle-income families and families of color, by downgrading the banks responsible for loans with interest exceeding 200%.” 

“Scheming to evade state interest rate caps should be grounds for the lowest possible rating under the CRA,” said Brent Adams, senior vice president of Woodstock Institute, a consumer advocacy group based in Illinois, which has a 36% cap on loans passed by an overwhelming majority of the legislature and supported by 86% of voters in the State. “The federal banking system was not developed to enable predatory lenders to evade the will of state legislatures.” 

“Triple-digit interest loans are no less predatory when laundered through regular banks – and these banks routinely let predatory lenders skirt state usury laws to take advantage of countless vulnerable consumers in their communities,” said Liz Zelnick, Accountable.US’ director of economic security and corporate power program. “If these banks want to act like predatory lenders, they should be treated as such by federal regulators.”

The letters were signed by Accountable.US, Americans for Financial Reform, Center for Responsible Lending, Consumer Action, Consumer Federation of America, National Community Reinvestment Coalition, NCLC (on behalf of our low-income clients), Public Citizen, U.S. PIRG, and Woodstock Institute.

Additional Resources

• FDIC Should Downgrade FinWise Bank Over Predatory ‘Rent-a-Bank’ Lending, Mar. 15, 2023
• TAB Bank, Facilitator of Predatory Puppy Loans, Gets Rating Downgraded by FDIC, Feb. 6, 2023
• In Evaluating TAB Bank, FDIC Should Consider Consumer Harm, Possible Legal Violations, from Predatory Lending, June 30, 2022
• Press Release, National Auto Repair Chains Must Stop Offering Predatory Loans Through EasyPay Finance and TAB Bank, May 18, 2022
• Report, Predatory Puppy Loans by TAB Bank and EasyPay Finance (Feb 1, 2022)
• NCLC’s High-Cost Rent-a-Bank Loan Watch List

The post FDIC Should Downgrade Three Banks Engaged in Predatory “Rent-a-Bank” Lending appeared first on Consumer Federation of America.

“Regardless of new technology, terms, appearance, earned wage advances, income share agreements, fintech payday loans, and other fintech consumer credit products are loans, and should be regulated as such at the state and federal level,” said Rachel Gittleman, Financial Services Outreach Manager with Consumer Federation of America. “We applaud the California DFPI for taking this important step to ensure that new consumer credit products are subject to existing laws and regulations, especially that all charges, whether allegedly voluntary or not, are subject to interest rate caps. CA DFPI confirmed that the majority of consumers who use “tip” based applications pay the allegedly voluntary “tip,” and that those tips equate to APRs in the range of 328% to 348%. The APRs for advances that did not accept tips were similarly in the triple digits. These proposed regulations will not only ensure that consumers are protected when using these products, but it will create a more even playing field with clear expectations for transparency, accountability, and oversight.”

See CFA Testimony before U.S. Senate Committee on Banking, Housing, and Urban Affairs more information on fintech consumer credit products.

The post Statement of Consumer Federation of America in Support of California Proposed Regulation on Fintech Consumer Credit appeared first on Consumer Federation of America.

“Hundreds of complaints revealing FinWise Bank’s predatory puppy loans, unaffordable lending and potential violations of the law strongly support downgrading the bank’s Community Reinvestment Act rating” said Lauren Saunders, associate director at the National Consumer Law Center. “FinWise Bank’s predatory credit that borrowers can’t afford to repay and that evades state interest rates does not meet the convenience and needs of communities as required by the CRA.”

Earlier this year, the FDIC downgraded another bank, Transportation Alliance Bank, over unfair or deceptive acts or practices by one of its partners, likely EasyPay Finance. FinWise Bank’s partner American First Finance has a business model similar to that of EasyPay Finance, offering predatory puppy loans and other deceptive, high-cost loans through retail stores for pets, furniture, auto repairs and appliances. The advocates’ comments pointed out that American First Finance has twice as many complaints as EasyPay. One consumer complained, “I purchase a puppy .. and its was super cute but… American first finance if you read this YOU GUYS ARE SCAMMERS AND LIERS dont trust them guys!!!!!!”

“The FDIC’s assessment of FinWise Bank must take into account the full scope of its business practices,” said Nadine Chabrier, senior policy and litigation counsel at the Center for Responsible Lending. “High-cost credit that extracts wealth and crushes borrowers with debt does not meet communities’ credit needs and must be penalized on CRA exams.”

Two of FinWise Bank’s other rent-a-bank lenders, Elevate and OppFi, have rates well over 50% for charge-offs, a measure of debts unlikely to be collected, illustrating high-rates of default and the predatory nature of their loans.

FinWise Bank, chartered in Utah and supervised by the FDIC, is one of only a few rogue banks that front for predatory lenders. Most states have interest rate limits to stop predatory lending, but predatory lenders try to evade state laws by laundering their loans through banks, which are exempt from state rate caps.

“Predatory payday and installment lenders are using harmful ‘rent-a-bark’ partnerships with FDIC banks, like FinWise, to make triple-digit interest rate loans to unsuspecting consumers. FinWise Bank must be stopped from fronting for these loans that are illegal across the country,” said Rachel Gittleman, financial services outreach manager at Consumer Federation of America.

The comments described how FinWise Bank partners American First Finance, Elevate, and OppFi have generated hundreds if not thousands of complaints to the Consumer Financial Protection Bureau (CFPB) about:

• Deception and unaffordable interest rates on loans that borrowers are unable to repay

• Receiving loans that they never applied for and identity theft

• Improper debt collection tactics, including collecting debt not owed, failure to validate debts, harassment and abuse

• Credit reporting problems, including incorrect information and failure to respond to disputes and errors

Under FDIC Guidance, banks are responsible for risks that arise from third-party relationships to the same extent as if the activity were handled by the institution.

“The FDIC can protect consumers, especially low wage earning working families by down-grading FinWise Bank. FinWise Bank’s participation in rent-a-bank schemes erases efforts by states to protect residents from predatory lenders through modest interest rate caps,” said Kimberly Fountain, Consumer Financial Justice Organizer.

“The federal banking system was not developed to enable predatory lenders to evade the clear will of both the people and the legislature in a given state,” said Brent Adams, Senior Vice President of Woodstock Institute, a consumer advocacy group based in Illinois, which has a 36% cap on loans passed by an overwhelming majority of the legislature and supported by 86% of the State. “FinWise’s role in scheming with predatory lenders to skirt consumer protections is anathema to the CRA and should earn FinWise the lowest possible rating under the CRA.”

“The FDIC must hold FinWise Bank accountable for the impact its lending has on consumers,” said Adam Rust, Senior Policy Advisor of the National Community Reinvestment Coalition. “FinWise’s ‘charter-as-a-service’ model doesn’t meet the conveniences and needs of borrowers. It conveniently serves the needs of predatory lenders. That contradiction underscores why it’s incumbent on the FDIC to downgrade FinWise on its CRA exam.”

The letter was signed by Accountable.US, Americans for Financial Reform, Center for Responsible Lending, Consumer Action, Consumer Federation of America, National Community Reinvestment Coalition, NCLC (on behalf of our low-income clients), Public Citizen, U.S. PIRG, and Woodstock Institute.

Additional Resources

• TAB Bank, Facilitator of Predatory Puppy Loans, Gets Rating Downgraded by FDIC, Feb. 6, 2023

• In Evaluating TAB Bank, FDIC Should Consider Consumer Harm, Possible Legal Violations, from Predatory Lending, June 30, 2022

• Press Release, National Auto Repair Chains Must Stop Offering Predatory Loans Through EasyPay Finance and TAB Bank, May 18, 2022

• Report, Predatory Puppy Loans by TAB Bank and EasyPay Finance (Feb 1, 2022)

• NCLC’s High-Cost Rent-a-Bank Loan Watch List

The post FDIC Should Downgrade FinWise Bank Over Predatory ‘Rent-a-Bank’ Lending appeared first on Consumer Federation of America.

Consumer advocates had urged the FDIC to downgrade the bank for offering predatory credit that does not meet the convenience and needs of communities, and provided evidence that TAB Bank was facilitating predatory puppy loans, predatory auto repair loans, and predatory loans to servicemembers and veterans. Through a “rent-a-bank” partnership with EasyPay Finance, the bank helped EasyPay make loans up to 189% APR in states where that rate is illegal for non-bank lenders. Hundreds of consumers have lodged complaints about these loans, describing payments that mostly go to interest, deceptive interest-free promotions, debt collector harassment, and credit reporting problems.

The public portion of TAB Bank’s evaluation identifies a violation of the Federal Trade Commission Act’s prohibition of unfair or deceptive acts or practices (UDAP).

TAB Bank is one of six rogue banks that consumer groups have urged the FDIC to stop from laundering triple-digit interest rate loans that are issued by nonbank lenders to evade state interest rate laws.

“TAB Bank has been disserving the community through its predatory rent-a-bank loans and deserves this downgrade,” said Lauren Saunders, associate director of the National Consumer Law Center. “No bank should help predatory lenders evade state interest rate laws and make destructive loans that put people in a debt trap.”

“TAB Bank has a record of enabling harmful rent-a-bank loans for auto repairs, pet purchases, and other retail purchases,” said Rachel Gittleman, financial services outreach manager for Consumer Federation of America. “This downgrade is an important first step, but we encourage the FDIC to stop TAB bank and others from peddling predatory loans into the communities that they are supposed to serve.”

“The CRA calls on banks to meet the convenience and needs of the communities where they do business,” said Adam Rust, senior policy advisor for the National Community Reinvestment Coalition. “That starts with not using a bank charter to facilitate harmful and deceptive lending practices. We commend the FDIC for taking this step to hold TAB accountable.”

“In lowering TAB Bank’s CRA score, the FDIC sent the message that banks engaged in predatory lending practices will face negative consequences,” said Nadine Chabrier, senior policy counsel at the Center for Responsible Lending. “We urge the FDIC to take additional steps to stop all banks it regulates from harming consumers through rent-a-bank schemes.”

The CRA, or Community Reinvestment Act, is a 1977 law intended to encourage insured banks and thrifts to meet local credit needs, including those of low- and moderate-income neighborhoods, consistent with safe and sound operations.

Additional Resources

• Read the CRA Comment: 40 Groups Urge FDIC To Downgrade TAB Bank, June 30, 2022
• Report: Predatory Puppy Loans by TAB Bank and EasyPay Finance; Press release, February 2022
• Letter to FDIC from consumer groups urging crackdown on predatory rent-a-bank lending, Feb. 4, 2022
• Report: Predatory Auto Repair Loans by TAB Bank and EasyPay Finance, May 11, 2022
• Letter to national auto repair chains urging them to stop offering loans through EasyPay and TAB Bank, May 11, 2022
• Report: Predatory Lenders TAB Bank and EasyPay Finance Harm Veterans and Military Servicemembers with Loans up to 189% APR; Press release, May 25, 2022
• Letter to FDIC from consumer groups urging crackdown on predatory rent-a-bank lending, Feb. 4, 2022

The post TAB Bank, Facilitator of Predatory Puppy Loans, Gets Rating Downgraded by FDIC appeared first on Consumer Federation of America.

“We applaud the President’s actions today and the CFPB’s proposed rule on credit card late fees, which currently total $12 to $14 billion a year and disproportionately burden subprime consumers and consumers of color,” said Rachel Gittleman, CFA’s Financial Services Outreach Manager. “We look forward to working with the CFPB on this much-needed rulemaking that, as proposed, will profoundly impact consumers and their financial well-being.”

“Consumers pay billions each year to hotels, airlines, telecommunications providers and ticket sellers in junk fees, and we fully support these proposals to rein in the practices that perpetuate them,” said Erin Witte, CFA’s Director of Consumer Protection. “We are glad to see that President Biden is sensitive to these economic pressures on consumers and we encourage Congress to approach this pervasive problem with equal vigor.”

The post Statement of Consumer Federation of America on President Joseph Biden’s Actions on Junk Fees appeared first on Consumer Federation of America.

“In states that have capped rates and protected their consumers from predatory lending, consumers employ a variety of strategies to grapple with the chronic gap between growing expenses and stagnating wages and wealth,” said Rachel Gittleman, CFA’s Financial Services Outreach Manager. “This report provides a helpful tool for legislators, advocates, and organizations working to identify safe, affordable alternatives to high cost loans.”

“We are in the midst of an era where more products and more companies are responding to the need for quick, small-dollar loans,” said Horacio Mendez, President & CEO of Woodstock Institute. “Gone are the days where triple-digit interest rate loans were a consumer’s only option.”

Although payday and high cost lenders market their loans to assist borrowers with financial emergencies, 69 percent of payday loan borrowers use these loans to cover recurring living expenses. The gap between income and expenses cannot be solved by credit alone, as it is the consequence of many contributing factors, including increasing inequality, stagnating wages, and the rising costs of common goods.

Given the persistent harms of high cost loans, a growing number of states have capped rates. For small loans, 36 percent is the dividing line between whether borrowers have a decent chance of affording payments, though states tend to impose lower rate caps for larger loans.

In states that have capped rates, consumers have been able to look to other financial strategies and other forms of small dollar credit when faced with budget shortfalls. Beyond additional sources of credit, 81 percent of payday loan borrowers said they would cut back on expenses when asked what they would do if faced with a cash shortfall and payday loans were unavailable. Woodstock also commissioned a poll this year that showed consumers employed a variety of strategies to address emergency cash needs. The top three strategies were (1) credit card (24%), (2) tapping into personal savings (23%), and (3) borrowing money or getting assistance from a church, charity, friends, or family (21%). In addition, new affordable lenders are moving into Illinois. As of mid-November of this year, the state has granted 168 new lending licenses since the 36% rate cap took effect. (Data provided pursuant to FOIA request.)

Alternatives discussed in the report will provide both resources for an individuals’ immediate budget shortfall and strategies for planning ahead for the next emergency.

Contact: Rachel Gittleman, 609-571-5953

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Introduced by Senate Banking Committee Chairman Sherrod Brown (D-OH), Sen. Bob Casey (D-PA) and Sen. Chris Van Hollen (D-MD), this bill would prohibit shadow banks and nonbank commercial entities from taking advantage of legal loopholes.

The post Coalition Supports Close the Shadow Banking Loophole Act appeared first on Consumer Federation of America.

The coalition, which includes Americans for Financial Reform, Bank Policy Institute, Center for Responsible Lending, Consumer Federation of America, Credit Union National Association, Independent Community Bankers of America, Mid-Size Bank Coalition of America, National Association of Federally-Insured Credit Unions, National Community Reinvestment Coalition, National Consumer Law Center (on behalf of its low-income clients) and U.S. PIRG, stated the following in a letter:

The time is now for Congress to close the ILC loophole before it is further exploited by firms seeking to gain all of the advantages of an FDIC-insured bank charter without the concomitant supervision and regulation that Congress has established for the corporate owners of full-service insured banks. As financial services trades and consumer advocates, we come together to fully support this legislation and look forward to working with the committee to advance this legislation in the future.

Why this matters:

Congress sought to preserve a competitive economy by establishing a strict separation between banking and commerce. The ILC loophole allows commercial entities to undermine the intent of Congress and ignore the protections designed to maintain that separation. This loophole:

• Creates a riskier financial system and less competitive economy;
• Gives major commercial firms – including Big Tech companies – access to sensitive balance and transaction data, adding to their trove of personal and behavioral data; and
• Exempts these nonbanks from many consumer data and privacy protections.

The Senate legislation would eliminate the loophole and strengthen protections for consumers, taxpayers and the financial system.

A short history of industrial loan companies:

Industrial loan companies offer special exemptions for any type of organization to control a full-service FDIC-insured depository institution without being subject to the same consolidated oversight and prudential standards or limitations applied to traditional financial institutions. These charters were established in the early 1900s and have historically been held by small, locally owned institutions.

The Competitive Equality Banking Act excluded ILCs from the definition of a “bank” in the Bank Holding Company Act in 1987. As a result, the size and number of these companies ballooned until, in 2013, the Dodd-Frank Act imposed a temporary moratorium on new ILCs. That moratorium has been lifted.

Additional background:

The coalition, which represents a broad cross-section of regulated banks, credit unions and consumer protection organizations, also supported H.R. 5912, the “Close the ILC Loophole Act” introduced in the House by Congressman Jesús “Chuy” García (D-IL), Stephen Lynch (D-MA), Lance Gooden (R-TX) and Pete Sessions (R-TX). The House bill passed through committee earlier this year.

The post Financial Services and Consumer Groups Support Senate Bill to Close Industrial Loan Company Loophole appeared first on Consumer Federation of America.

In response to this report and campaign, Congress passed the Military Lending Act (MLA), which set forth six core protections for military members and their dependents.

The MLA:

• Establishes a 36% interest rate cap for consumer credit. This interest rate is inclusive of all fees, charges, credit insurance and ancillary products sold with the credit.
• Requires disclosure of the annual percentage rate and payment obligations.
• Bans requiring the borrower to use a car title, personal check, debit authorization, or wage allotment to secure the loan.
• Applies state consumer protections to nonresident service members and their dependents residing within the state.
• Bans forced arbitration agreements.
• Prohibits lenders from refinancing, renewing, or consolidating existing credit issued by the same lender.

Although these protections alone are incredibly strong, the remedy included in the law makes them particularly effective. The MLA states that “[a]ny credit agreement, promissory note, or other contract prohibited under this section is void from the inception of such contract.”[1] In sum, if a company violates a servicemember’s protections under the MLA, whether by including an arbitration agreement, exceeding 36% APR, or failing to disclose fees properly, the loan is void.

The expansive protections and absolute remedy codified in the MLA have proved to be incredibly effective. An earlier CFA study showed a 70% drop in the number of payday loan outlets surrounding Camp Pendleton in California. Another study showed that that the number of servicemembers who sought help from the Navy-Marine Corps Relief Society for paying off predatory loans dropped to 3 in 2018 from 1,577 in 2004, before the law took effect.

However, despite the strength and effectiveness of the MLA, servicemembers are still pressured into high cost loans that violate the law and harm those men and women and their families. So, when a servicemember seeks to enforce their rights in court, they should be allowed to do so per the MLA.

But that’s not what happened for Army Private Emmanuel Louis. Bluegreen Vacations, a timeshare resort and vacation company, lured newly enlisted Army Private Emmanuel Louis, his wife Tamarah, and their one-year-old child to its resort with promises of an inexpensive vacation. Once there, however, Bluegreen trapped the Louises in an office for nine hours until they finally relented and signed a contract for “membership” in the company’s Vacation Club and a hefty loan to finance that membership. If valid, this loan would cost the Louises over $25,000 over ten years.

The loan violated the MLA, failing to follow certain disclosure requirements and including a forced arbitration clause. Stuck in a $25,000 loan, the Louises filed a lawsuit against Bluegreen Vacations, claiming that these violations of the MLA should nullify the contract.

The court decided that Private Louis could not demonstrate that he experienced any concrete harm from the violations of any of the MLA provisions (interest rate cap, required disclosures, or forced arbitration) and, therefore, he did not have standing to sue. However, if lenders violate the MLA provisions, they are harming servicemembers by depriving them of their rights and protections as guaranteed under the law.

This decision, if upheld, would set a very damaging precedent for our servicemembers and our national security.

In response to their appeal, the Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) filed a friend-of-the-court (“amicus”) brief in the United States Court of Appeals for the Eleventh Circuit. In their brief, the CFPB and FTC argue that this decision should be reversed both because the Louises are being held to an illegal contract and because failing to do so would undermine the remedial purposes of the MLA, codified to “enhance operational readiness and safeguard the national defense.”

Another amicus brief was filed by seven military and veterans organizations, including Blue Star Families, Five Star Veterans Center, Jacksonville Area Legal Aid, the Jewish War Veterans of the United States of America, Military Officers Association of America, National Military Family Association, and the United States Army Warrant Officers Association. Their brief similarly argued the importance and significant impact of the MLA, and that this case, if upheld, could “substantially harm servicemembers and national security.”

The Louises appeal will be decided by the 11^th Circuit Court of Appeals. For the sake of the Louises, servicemembers and their dependents nationwide, and the country’s national security and military readiness, the decision should be reversed and the critically important protections and remedy of the MLA should be upheld.

[1] 10 U.S.C. § 987(f)(3)

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As the FDIC prepares to conduct a Community Reinvestment Act (CRA) examination of Utah-based TAB Bank – which works with EasyPay Finance to snare consumers into predatory loans for auto repairs, tires, furniture, and even pets – the Stop the Debt Trap coalition filed a petition with the FDIC signed by more than 44,500 people.

The petition notes that “the typical predatory loan borrower will make payments for months that go mostly to interest and do little to pay off the loan,” and urges the FDIC to stop “Transportation Alliance Bank and any other bank from fronting for predatory lenders evading state interest rate limits.”

In addition to the petition, the Coalition submitted a CRA comment letter to the FDIC describing hundreds of consumer complaints filed against TAB Bank’s lending partner, EasyPay Finance. The letter asserts that EasyPay originates loans in TAB Bank’s name and the bank is responsible for its conduct. The letter concludes: “The FDIC should downgrade TAB Bank’s CRA rating in light of the extensive evidence of the abusive lending and potential violations of the law that it is facilitating. High-cost credit that extracts wealth and burdens borrowers in debt does not meet credit needs in a responsible manner and must be penalized on CRA exams.”

In its comment letter, the coalition argues: “In assessing whether TAB Bank is appropriately serving its communities, the FDIC should consider not merely access to credit but also the quality of credit extended. Predatory credit at high interest rates that borrowers cannot afford to repay, credit designed to evade state interest rate laws, credit that is the result of deceptive practices, and credit that leads to violations of debt collection, credit reporting, and other laws does not meet the convenience and needs of communities.”

Today’s action follows reports by the Stop the Debt Trap Coalition about predatory puppy loans and predatory auto repair loans by EasyPay Finance and TAB Bank, demonstrating that hundreds of consumers have filed complaints describing outrageous interest rates hidden in fine print, deceptive promises of rebates, and payments that go mostly to interest. These loans often result in damaged credit reports and debt collection activity. Another report details the harm to veterans and military families, and potential violations of the Military Lending Act, which generally prohibits interest rates above 36% for servicemembers and dependents.

Contact:  Rachel Gittleman, rgittleman@consumerfed.org

The post In Evaluating TAB Bank, FDIC Should Consider Consumer Harm, Possible Legal Violations, from Predatory Lending appeared first on Consumer Federation of America.

The post Predatory Lenders TAB Bank and EasyPay Finance Harm Veterans and Military Servicemembers with Loans up to 189% APR appeared first on Consumer Federation of America.

EasyPay Finance, which charges up to 189% APR, is popping up as a financing option at furniture stores, auto repair shops, pet stores and other retail outlets everywhere – including at shops near military bases where the loans are more likely to affect servicemembers. For example, EasyPay Finance is available at numerous auto repair locations and furniture stores that offer EasyPay loans near a military base.

“The fact that predatory lenders continue to target military families is unacceptable,” said Besa Pinchotti, CEO of the National Military Family Association. ”Military families make tremendous sacrifices for our country every day. It’s outrageous that after all the work we’ve done to protect our military families, they continue to be preyed upon by lenders—especially when they’re at their most vulnerable—needing money for car repairs, to furnish their homes after a military-mandated moves or to make ends meet during a deployment.”

Because banks are exempt from state interest rate caps, TAB Bank helps disguise EasyPay Finance loans as “bank loans,” enabling it to charge exorbitant rates in states that prohibit them. One Virginia military consumer complained about “illegal” 119% interest that appeared to be far above Virginia’s legal rate.

“The men and women who have served our country deserve better than predatory loans,” said Paul E. Kantwill, Executive Director of The Rule of Law Institute at Loyola University Chicago School of Law. “At 100% to 189% APR, TAB Bank and EasyPay Finance’s loans evade state interest rate laws and harm members of the military community.”

The complaints indicate that EasyPay Finance and TAB Bank may be violating or evading the Military Lending Act, a law that limits the annual interest rate on loans to military servicemembers and their dependents to no higher than 36%. For example, one servicemember in Virginia got stuck with 96% APR for an auto repair and couldn’t get EasyPay to fix the rate. Another servicemember in Nevada advised the pet store that they were military but “I am now paying 189% interest on my loan. When I called [EasyPay] they were rude and said they do not have to lower my interest rate at all and they based it all on a loophole.”

“EasyPay and TAB Bank are using the harmful rent-a-bank model to evade state and federal laws and lure servicemembers and veterans into predatory, outrageously priced loans for auto repairs, pet adoptions, and other retail purchases,” said Rachel Gittleman, Financial Services Outreach Manager of the Consumer Federation of America.

“It is unconscionable that TAB Bank and EasyPay Finance are making loans with up to 189% interest to servicemembers and veterans,” said Lauren Saunders, Associate Director of the National Consumer Law Center. “Auto repair shops, pet stores, and other retailers concerned with their reputation should stop steering customers to predatory loans by TAB Bank and EasyPay Finance.”

Numerous military consumers have complained about EasyPay loans to the Consumer Financial Protection Bureau, reporting:

• Outrageous interest rates of 96% to 189% charged to servicemembers, veterans or their family members, sometimes in states that do not allow those rates.
• Payments for months and years that do little to reduce the loan balance.
• Interest rates hidden in fine print. Applications required to be completed on small cellphones, making the contract language barely legible, leave consumers in the dark about the terms.
• Promises of elusive full interest rebates if paid in 90 days, with obstacles that prevent consumers from avoiding interest.
• Automatic payments not properly processed, leading to late payments that deprive the consumer of the interest rebate.
• Rude and unhelpful customer service and administrative errors, leading to missed payments, fees, and loss of the interest-free option.
• Harm to credit reports, including from loans paid in full or reported inaccurately. No response to consumer disputes.
• Debt collection issues, with loans sent to collectors after the interest balloons, insults even when payments errors happened while the consumer was in the hospital, and collectors failing to correct credit reports after the loan is paid.

“The Department of Defense studied high-interest loans like those issued by EasyPay Finance and TAB Bank and concluded they harmed troops and their families – and undermined military readiness,” said Nadine Chabrier, senior policy counsel at the Center for Responsible Lending. “TAB Bank and retailers, such as Meineke, should stop facilitating the sale of EasyPay loans, which inflict pain upon military communities and consumers across the country. The FDIC is responsible for supervising TAB Bank and should stop it from abusing its charter by enabling these predatory loans.”

A recent consumer alert warns of deceptive auto repair financing practices and tells consumers what steps to take if they’ve taken out an EasyPay/TAB bank loan. Military Families need to read the small print to avoid costly loans at high interest rates, and know their rights under the Military Lending Act. Those who have experienced these unreasonably high interest rates and deceptive financial lending practices should contact the Consumer Financial Protection Bureau for investigation.

The coalition is also circulating a petition to urge the FDIC to stop TAB Bank and other banks from helping nonbank lenders disguise their loans as bank loans that are exempt from state interest rate limits. The petition currently has more than 19,000 signatures.

Contact: Rachel Gittleman

The post TAB Bank and EasyPay Finance’s Predatory Loans Harm Veterans and Servicemembers appeared first on Consumer Federation of America.

“Consumers struggling to pay for auto repairs repeatedly report being steered into predatory loans with shocking and often deceptive rates hidden in the fine print of applications, frequently not known until after the repairs are completed,” the letters state. “These predatory loans have a lasting impact on consumers, causing harm to their credit reports and leading to debt collection harassment.” The letter urged each repair chain “to disassociate itself from these practices that exploit vulnerable families.”

Through auto repair and tire shops across the country, EasyPay Finance ( owned by Duvera Billing Services) issues loans up to 189% APR. EasyPay advertises to auto repair shops that it can “Increase Your Shop’s Revenue” and prevent “Losing Your Credit Challenged Customers.”

In states that do not allow predatory interest rates, EasyPay launders its loans through Transportation Alliance Bank (TAB Bank) because banks are exempt from state rate caps. This is a scheme for EasyPay to collect exorbitant rates it cannot legally charge directly. In other states, EasyPay lends directly in its own name, often as a retail installment sale.

 Hundreds of consumers have complained about EasyPay auto repair and tire loans. Complaints to the Consumer Financial Protection Bureau, Better Business Bureau, and Ripoff Reports describe:

• Outrageous interest rates of 100% to 189%, sometimes charged to servicemembers and veterans. Consumers are shocked that payments for months and years have little impact on the balance.
• Interest rates hidden in fine print or not disclosed until repairs are finished. Applications taken over the telephone, or required to be completed on tablets and smartphones, without written copies, leave consumers in the dark about the terms.
• Deceptive promises of full interest rebates if paid in 90 days, with numerous obstacles that prevent consumers from avoiding interest or knowing their payoff balance.
• Electronic debits that were not authorized, differed from the agreed payment, or continued after a payment plan was fulfilled.
• Rude and unhelpful customer service and administrative errors, leading to missed payments, fees, and loss of the interest-free option.
• Harm to credit reports, including from loans paid in full or reported for the wrong consumer. No response to consumer disputes.
• Debt collection harassment and refusal to honor payment plans, including for those impacted by COVID.

A petition to urge the FDIC to stop TAB Bank and other banks from helping nonbank lenders disguise their loans as bank loans that are exempt from state interest rate limits is also being circulated. It currently has more than 19,000 signatures.

The letters make a strong case for the national auto repair chains to stop their stores from offering predatory loans from EasyPay Finance and TAB Bank.

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The National Consumer Law Center also released a Consumer Alert about these loans, which warns consumers to “beware of the fine print that could disguise costly loans at rates up to 189%.” Advocates urge consumers to avoid any loan above 36% APR including fees. If caught in an EasyPay Finance loan, consumers should file a complaint with the CFPB and state regulators, opt out of the forced arbitration clause, and consult a lawyer.

“Loans at 189% are illegal in most states, but TAB Bank is helping EasyPay Finance evade those laws and multiply the pain of an expensive car repair,” said Lauren Saunders, Associate Director at the National Consumer Law Center.

TAB Bank is one of only a few rogue banks willing to front for predatory lenders. The bank, which is chartered in Utah and supervised by the FDIC, helps EasyPay Finance (owned by Duvera Billing Services) charge up to 189% on loans offered through stores nationwide, including auto mechanics, furniture stores, and pet stores offering predatory puppy loans. In states that have outlawed predatory interest rates, EasyPay Finance launders its loans through TAB Bank so that it can charge high interest rates that it cannot legally charge as a non-bank lender. In other states, it makes the loans directly.

“Auto repair shops throughout the country, including major auto repair companies, are steering struggling consumers into deceptive, high cost loans with lasting impacts, including credit report harm and debt collection harassment,” said Rachel Gittleman, Financial Services Outreach Manager at Consumer Federation of America.

“AAMCO, JiffyLube, Meineke, Midas, and other car repair companies bring shame to their name by helping to spring a debt trap on their customers. Car repair shops and TAB Bank should stop facilitating this predatory lending scheme and the FDIC should shut it down,” said Taylor Roberson, Federal Policy Counsel at the Center for Responsible Lending.

In addition to the excessive interest rates, complaints about the TAB Bank/EasyPay Finance loans describe tactics to conceal the interest rate, exploitation of veterans and servicemembers, the use of impossible-to-obtain 90-day full-interest rebate offers, unauthorized direct debits, mistakes and poor customer service, damaged credit reports, and debt collection harassment.

“A car repair can be a devastating expense, and financially fragile families don’t need predatory lenders amplifying the damage. EasyPay and its rent-a-bank partner TAB Bank are preying on people in a way that exploits the centrality of cars in American society. For most people, having a car that runs well is essential to their daily economic life and to managing a family,” said Elyse Hicks, Consumer Policy Counsel at Americans for Financial Reform.

Stop the Debt Trap is a coalition of more than 800 civil rights, consumer, labor, faith, veterans, seniors and community organizations from all 50 states working together to stop predatory lending.

Contacts: Rachel Gittleman

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High-cost, unaffordable forms of credit or disguised credit are marketed as lifelines to consumers and small businesses, but predatory products do not provide access to affordable credit. Instead, they lead to financial ruin by trapping borrowers in high-cost loans and devastating cycles of debt that leave them worse off.

The post CFA and 174 Partner Organizations Share Principles for Responsible Consumer and Small Business Loans Ahead of CFPB Report to Congress appeared first on Consumer Federation of America.

“BNPL products have largely evaded oversight by federal and state regulators,” the groups stated. “Although these products could have a place in meeting consumer needs if they operate as promised, they pose a risk to consumers and should be covered by basic consumer protections.” 

BNPL credit may provide some consumers with an affordable way to finance purchases, but the groups warn that BNPL credit presents cause for concern, including: a lack of meaningful underwriting for a consumer’s ability to repay, which could lead to unmanageable debt; hidden fees and absence of clear disclosures; problems with disputes and refunds; confusing payment schedules for multiple purchases; deceptive claims about credit building or potentially negative impact on credit reporting; and debt collection issues.

“Marketing of Buy-Now-Pay-Later credit is enticing, with promises of instant approval and no impact on a consumer’s credit,” said the groups. “However, many providers are not conducting meaningful underwriting to assess a borrower’s ability to repay, allowing consumers to accumulate unaffordable amounts of debt.” 

Buy Now, Pay Later options have increased dramatically in recent years. As of December 2021, more than 8 million consumers used BNPL in December 2021, an all-time high. Consumers are already being harmed by a lack of regulatory oversight, as seen in complaints to the CFPB and Better Business Bureau. 

According to a recent survey, nearly 40% of BNPL users said that they used BNPL credit to make purchases that would otherwise not fit in their budget. Additional recent analysis found that consumers who had overdrafted their account were more than twice as likely to have used BNPL services. 

The groups recommend that the Bureau:

• Apply credit card protections of the Truth in Lending Act (TILA), including the provisions of the Credit Card Accountability Responsibility and Disclosure (CARD) Act. Applying credit card rules to BNPL credit would provide consumers with basic protections, such as dispute and chargeback rights, cost transparency, uniform disclosures and statements, reasonable penalty fees, and underwriting for a consumer’s ability to repay.
• Issue a larger participant rule to bring the BNPL market (along with other installment loan markets) within the CFPB’s supervision.
• Prevent or take action against unfair, deceptive or abusive acts and practices (UDAAPs) and ensure compliance with fair lending laws.
• Enforce the Electronic Fund Transfer Act’s ban on compulsory repayment of credit by preauthorized electronic fund transfer.
• Conduct research on the impact of the BNPL market on consumers and on their credit reports.

“New financial products can result in disparate impacts on communities of color and other financially vulnerable consumers,” the groups warn. “It is essential that the CFPB apply anti-discrimination laws to new lending platforms, especially BNPL credit, which is disproportionately used by Black and Hispanic Americans, and young adults.”

A longer, more detailed comment was also submitted by Center for Responsible Lending, Consumer Federation of America, and National Consumer Law Center.

Contact: Rachel Gittleman, 609-571-5953

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• A new report describing how TAB Bank helps EasyPay make predatory puppy loans;
• A February 15 rally with the Utah Humane Society at the statehouse in Salt Lake City to spotlight TAB Bank’s role in financing predatory puppy loans;
• A February 17 social media storm – using #PredatoryPuppyLoans, #PredatoryTABbank and #LoveYourPetDay;
• An effort to collect stories from people impacted by predatory puppy loans;
• A focus on how predatory financing promotes the sale of puppy mill dogs;
• A petition to urge the FDIC to stop TAB Bank and other banks from helping nonbank lenders disguise their loans as bank loans that are exempt from state interest rate limits;
• Work to broaden support for the Veterans and Consumers Fair Credit Act, which would set a national 36% interest rate cap;
• And more to come …

EasyPay offers financing for purchases at pet stores, auto mechanics, furniture stores and other retailers at rates ranging from 130% to 189% APR. In 32 states where those rates are illegal, EasyPay launders its loans through TAB Bank, headquartered in Utah, to disguise the loans as bank loans that are exempt from state rate caps. This is a practice often referred to as a “rent-a-bank” scheme. In states that allow these high rates, EasyPay extends financing directly. To see which stores offer EasyPay loans, go to https://findastore.easypayfinance.com/.

Hundreds of consumers have submitted complaints about EasyPay (owned by the company Duvera Billing Services) to the Consumer Financial Protection Bureau (CFPB), Better Business Bureau, and Ripoff Report. They describe: sky-high interest rates with payments that go mostly to interest; high rates even for military servicemembers; deceptive interest-free promotions; debt collectors hounding people for money; and credit reporting abuses. For example:

• A New Jersey consumer went into a pet store “in hopes of purchasing a cocker spaniel….I found that I am being charged 151.97 % which is five times the legal limit of 30 % that can be charged in New Jersey.”
• A military consumer in Florida described “the egregious interest rate” of 130% APR for a dog.
• Another person complained that a pet store would not take back a dog who was sick and eventually died: “I had no choice [but] to continue to pay them [so] as not to ruin my credit history, all while trying to save a dog paying thousands [of] dollars in veterinarian bills…. It tore my family apart losing the dog. My children were especially devastated…. I only borrowed [$2200.00] and it is reporting I owe [$5500.00] on my credit report due to interest.”

These and other stories are described in a new report on Predatory Puppy Loans by TAB Bank and EasyPay Finance.

“The harmful ‘rent-a-bark’ model is being used by predatory payday and installment lenders to make triple-digit interest rate loans to those looking to bring puppies and other pets home. TAB Bank must be stopped from fronting for these loans that are illegal across the country,” said Rachel Gittleman, financial services outreach manager at Consumer Federation of America.

“TAB Bank is misusing its bank charter by fronting for abusive loans that bleed consumers dry,” said Nadine Chabrier, policy and litigation counsel at the Center for Responsible Lending. “Responsible merchants should stop peddling predatory EasyPay loans and the FDIC should end TAB Bank’s participation in this scheme.”

“Pushing financed purchases is just another way puppy mills and their pet store sales outlets get away with selling puppies for thousands of dollars to unsuspecting consumers, many of whom end up with extremely high interest rates and hidden fees they frequently cannot afford,” said John Goodwin, senior director of the Stop Puppy Mills campaign for the Humane Society of the United States. “Some pet stores have reported that 80% of the puppies they sell are financed, indicating that these predatory loans are a key part of the puppy mill to pet store pipeline.”

“TAB Bank’s partnership with EasyPay Finance promotes exploitative financing of puppies from inhumane, high-volume dog breeding facilities that ignore the needs of the puppies, including proper veterinary care and early socialization,” said Rachel Heatley, Advocacy Director of the Utah Humane Society.

“The FDIC must break up the romance between TAB Bank and EasyPay Finance,” said Lauren Saunders, associate director of the National Consumer Law Center. “TAB Bank and EasyPay’s rent-a-bank relationship enables 189% puppy loans of questionable legality – well in excess of many state interest rate caps – dramatically increasing the cost of a family pet.”

“The FDIC should be a watchdog that pursues banks, like TAB Bank, that are using rent-a-bank schemes. Under previous leadership, the agency didn’t even bark, let alone bite. We are hopeful new leadership will stop these predatory puppy loans that trap people in endless debt,” said Candace Archer at Americans for Financial Reform.

“The FDIC needs to install a fence between TAB Bank – or any bank – and predatory puppy lenders,” said Adam Rust, Senior Policy Advisor, National Community Reinvestment Coalition. “With new leadership at the FDIC, it’s time to close down these loopholes.”

“It’s time for the FDIC to put a leash on predatory puppy loans from TAB Bank, which is having a ball at the expense of consumers and their furry friends,” said Mike Litt, U.S. PIRG’s consumer campaign director.

“I’m a dog dad. My dogs are my family,” said Brent Adams, Senior Vice President of Woodstock Institute. “TAB Bank and EasyPay know the love of an animal will push many people into one of their predatory loans. This is financial exploitation of the worst kind.”

“A triple digit interest loan is no less predatory when it’s laundered through a bank. TAB Bank is only making a bad situation worse by facilitating high-cost loans that promote the use of abusive puppy mills,” said Jeremy Funk, rescue dog owner and spokesman for Accountable.US. “Federal regulators should crack down on this crossover of exploitative behavior that is hurting consumers and animals alike.”

Earlier this month, more than a dozen advocacy organizations called for the new leadership at the FDIC to stop banks from fronting for predatory lenders through these schemes.

Background on Puppy Mills

According to the Humane Society of the United States (HSUS), a puppy mill is an inhumane, high-volume dog breeding facility that churns out puppies for profit, ignoring the needs of the pups and their parents. Puppies from mills are often sick and unsocialized. Breeding dogs are often confined to small, filthy cages for their entire lives, bred repeatedly until their bodies wear out. Puppy mills keep this cruelty hidden by selling through third parties like pet stores. Pet stores often push lending options on their customers with false promises of low interest rates only to hand them over to third party lenders like EasyPay. The HSUS recommends that those looking to add a new pet to their family avoid pet stores and instead adopt from a shelter or rescue or seek out a responsible breeder that only sells directly to the public.

For more information, including B-roll of puppy mills or pet stores, or to interview an HSUS representative, please contact Kirsten Peek at kpeek@humanesociety.org.

Contact: Rachel Gittleman, 609-571-5953

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“Last year, Congress took a stand against the harmful rent-a-bank model that is being used by predatory payday and installment lenders to make triple-digit interest rate loans that are illegal across the country by overturning the “fake lender” rule,” said Rachel Gittleman, Financial Services Outreach Manager with Consumer Federation of America. “But rent-a-bank lenders are alive and well, using a few FDIC-regulated banks to peddle predatory loans to consumers throughout the country. The FDIC must stop permitting its supervised banks from engaging in this harmful behavior.”

The letter, in part, states: “FDIC-supervised banks are helping predatory lenders make loans up to 225% APR that are illegal in almost every state. These rent-a-bank schemes often operate under the guise of innovative ‘fintech’ products, even as their high-cost, high-default business model inflicts harms similar to those inflicted by traditional payday lenders…. Rent-a-bank schemes have flourished at FDIC banks in the past few years and it is time for that to come to an end.”

In a rent-a-bank lending scheme, a company that is not a bank runs a lending program and takes most of the profit, but a bank nominally approves, initially funds, and puts its name on the loans. This arrangement helps the true lender – the nonbank company – to evade state interest rate limits, which don’t apply to banks.

The advocates’ letter points to President Biden’s pledge to no longer allow the schemes, a bipartisan vote in Congress disapproving them, broad bipartisan opposition to evasion of state rate caps including a letter from 413 groups representing all 50 states, recent action from the Office of the Comptroller of the Currency to stop these predatory loans, and numerous reasons why the FDIC as a bank watchdog has a responsibility to shut down these illegal operations.

“The FDIC appears to have done nothing to curtail the predatory lending that has exploded on its watch. The OCC, in contrast, appears to have stopped the two OCC-supervised banks that were enabling high-cost installment loans even before Congress overturned the OCC rule. Unfortunately, the end to the OCC fake lender rule did not end rent-a-bank schemes, which are continuing using FDIC-supervised banks,” the letter states.

 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.

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“Although innovation plays an important role in expanding access to financial services, regulators must keep careful watch of rapidly growing products and fee models that share many similarities with age-old predatory products,” said Rachel Gittleman, Financial Services Outreach Manager of the Consumer Federation of America. “We should be especially wary of products that claim to be promoting financial inclusion but, in reality, do quite the opposite.”

“Many fintechs are coming up with clever arguments about how they are not offering ‘credit’ subject to consumer protection laws, but if it walks like a duck and quacks like a duck, it’s a duck,” said Lauren Saunders, Associate Director of the National Consumer Law Center. “The CFPB needs to act quickly to stamp out evasions of consumer protection laws before they spread.”

“Much of the fintech industry operates in an underregulated, Wild West environment. To stop lenders from charging illegally high interest rates, targeting people of color with predatory products or harming consumers in other ways, the CFPB must supply sufficient oversight and apply consumer financial protection law to the fintech industry,” said Taylor Roberson, Federal Policy Counsel of the Center for Responsible Lending.

“Today’s letter sends a clear message—regardless of industry hype or flashy marketing, companies offering predatory products have to comply with the law. As new, tech-branded financial offerings emerge, the same age-old risks to consumers persist. It’s critical that the CFPB continue to closely monitor these companies and take action to protect the public,” said Ben Kaufman, Head of Investigations and Senior Policy Advisor of the Student Borrower Protection Center.

The letter discusses various products and fee models that share similarities in how they operate and how they use “innovation” to claim that they do not fit within the existing regulatory framework. Some also use deceptive means to disguise the cost of credit. The groups argue that regardless of their structure, each of these products is credit—they provide funding today and are repaid later. Given that, these products should be subject to the host of state and federal consumer protection laws that regulate credit products.

At a minimum, these products need to be covered by basic consumer protections and be examined for unfair, deceptive or abusive practices and unlawful discrimination independently of compliance with credit laws. Each of these products discussed in the letter should be regulated as the financial services products that they are.

Oversight is especially urgent as these offerings continue to increase and infiltrate new market areas. Allowing these products to escape coverage would lead to an undermining of consumer protection laws, making the financial marketplace less fair and competitive.

The Consumer Federation of America is an association of more than 250 nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education.

Contact: Rachel Gittleman, 609-571-5953

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