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?
The Rent-A-Bank Scheme | Center for Responsible Lending, regularly updated
"Predatory lenders are making loans of 100% APR or more in states with limits of 36% or less by laundering loans through an out-of-state bank that is not subject to state interest rate limits. This is a rent-a-bank scheme."
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.
Rent-A-Bank In The News
Proposed Federal Banking Rule Would Unleash Predatory Lending in All 50 States | Press Release, Consumer Federation of America, September 4, 2020. "The OCC’s Plan Would Gut Longstanding Anti-Evasion Doctrine and Encourage Triple-Digit Interest Rate Loans That Violate State Rate Cap Laws."
DBO Launches Investigation Into Possible Evasion of California’s New Interest Rate Caps By Prominent Auto Title Lender, LoanMart | Press Release, CA Dept of Business Oversight (DBO), September 3, 2020
This article explains what the threat means to states like AZ and NC that took action against high cost payday lending. After a 15-year ban, could payday lending return to North Carolina? | Sophie Kasakove, The News & Observer, August 6, 2020
Advocates Praise D.C. Attorney General Suit Against Predatory High-Cost Rent-a-Bank Lender | NCLC Press Release, June 5, 2020
Advocates Condemn Rent-a-Bank Rule that Encourages Predatory High-Cost Loans; Call on Congress to Pass Federal 36% Interest Rate Cap Limit | NCLC Press Release, May 29, 2020
‘Rent-a-Bank’ Lending Practices Trigger Calls For Regulation By PYMNTS | March 11, 2020
Based on a paywalled article in the Wall Street Journal
Rent-A-Bank In The News
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
Trump Administration Declares Open Season on Consumers for Subprime Lenders
by Adam Levitin | Credit Slips, November 18, 2019
November 12, 2019 | NPR, All Things Considered
Rent-A-Bank In The News 2023
"Online lender banned from offering certain short-term loans, required to link executive compensation with legal compliance"
Note: Enova's NetCredit-branded subsidiary is on our Rent-A-Bank Lenders in AZ list.
Colorado Governor Signs Leading-Edge Law Preventing Evasion of State Usury Caps | Red Lake Nation News, Jun 7, 2023 --and--
New Colorado Law a Model for Stopping Predatory Rent-a-Bank Lending | NCLC, Jun 6, 2023
"Colorado is first state in decades to opt out of federal law that facilitates 225% APR loans"
Adding Fuel to the Fire: OppFi Hurts, Does Not Help, Borrowers’ Credit Health | CRL, April 7, 2023 | Factsheet
Burned Borrowers: A Look at the Experiences of OppFi Customers | CRL, April 7, 2023 | Factsheet
FDIC Should Downgrade Three Banks Engaged in Predatory “Rent-a-Bank” Lending | Press Release, NCLC, March 30, 2023 | See also our Letters page.
New Angles in Challenging Rent-a-Bank Schemes | by Lauren Saunders, NCLC, Feb. 07, 2023
"This article focuses on less-known angles to challenge rent-a-bank schemes, based on the reality that federal preemption available to bank-originated credit is not so extensive as many predatory lenders and banks assume."
Rent-a-Bank Payday Lenders’ New Filings Show 55% Average Loss Rates | By: Alex Horowitz & Chase Hatchett, The Pew Charitable Trust | January 9, 2023
"Loans are charged off at rates far higher than any other product in the banking system"
Rent-A-Bank In The News 2022
Iowa consumers to collect refunds for ‘predatory’ pet loans, auto-repair loans | By: Clark Kauffman (Iowa Capital Dispatch) | Dec 21, 2022
"A Utah-based bank that’s behind high-interest, “predatory” loans for pet buyers must refund money to Iowans who were charged the illegal interest rates."
How High-Interest ‘Rent-a-Bank’ Loans Sidestep State Rate Caps |
By Annie Millerbernd, Nerdwallet via Yahoo, Dec 2, 2022
Rent-A-Bank In The News 2021
President Signs Legislation to Repeal Banking Regulator's Predatory “Fake Lender” Rule | CFA Press Release, July 1, 2021
"Washington, D.C. – Last night, President Biden signed a resolution into law that repeals the OCC’s “fake lender” rule, which allows predatory lenders to evade state interest rate laws by putting a bank’s name on the paperwork."
House Votes to Repeal Banking Regulator’s Predatory “Fake Lender” Rule | CFA Press Release, June 24, 2021
National Consumer Law Center Advocates Praise U.S. House Vote to Repeal National Banking Regulator’s Predatory Lending Rule | NCLC Press Release, June 24, 2021
Who Supports Overturning the OCC's "Fake Lender" Rule? | Consumer Federation of America brief, April 30, 2021
"...a bank’s mere name on a piece of paper should not allow predatory lenders to hide behind a fake lender in order to evade state usury laws."
Consumer Advocate Leaders in 36 States and Washington, D.C. Balk at “Fake Lender” Rule | NACA Press Release, April 27, 2021
Bipartisan Group of 25 State Attorneys General Urge Congress to Repeal OCC “True Lender” Rule | Letter, April 21, 2021 | NCLC Press Release
"Letter Reflects Bipartisan Support for State Interest Rate Caps and the Need to Stop “Rent-a-Bank” Evasions by Predatory Lenders". The Arizona AG did not sign.
138 Scholars Call for Congressional Repeal of “True Lender” Rule | Letter, April 20, 2021 | NCLC Press Release
"OCC Rule Usurps Role States Have Had Since Founding of the Nation in Protecting Families from Usurious Lending"
Brent Ruffner, Daily Independent | April 9, 2021
AG Racine Sues Online Lender for Making Predatory and Deceptive Loans to 4,000+ District Consumers | Press Release, DC Attorney General, April 5, 2021
NY AG James Sues to Stop Trump Administration from Allowing Predatory Lenders to Take Advantage Of New York’s Most Vulnerable Communities | Press Release, NY Attorney General, January 5, 2021
Toolkit for Advocates
CEI Rent-A-Bank Lenders in AZ **Updated 01/2023**
Center for Responsible Lending (CRL)
Factsheet - OppFi Hurts, Does Not Help, Borrowers’ Credit Health | April 7, 2023
Factsheet - A Look at the
Experiences of OppFi Customers | April 7, 2023
National Consumer Law Center (NCLC)
Watch List - High-Cost Rent-a-Bank Loan
Info - Rent-a-Bank Loans
Complaint to FDIC re: Capital Community Bank
Letters & Comments
Senators must protect borrowers | Cynthia Zwick & Kelly Griffith, Anthem Independent, April 21, 2021
Wildfire and CEI Press Advisory "Congress to Introduce Resolution Rescinding 'Fake Lender' Rule Enabling Predatory Lenders to Evade Arizona’s Interest Rate Limits" | March 29, 2021
Letter to Speaker Pelosi, Majority Leader Schumer, Minority Leader McCarthy and Minority Leader McConnell re: "Support CRA challenge to OCC 'fake lender' predatory lending rule" | March 22, 2021 | signed by 325 organizations including 13 in AZ
CEI Letter to AG and DIFI requesting enforcement re: Rent-A-Bank | September 23, 2020
CEI Press Release on OCC "True Lender" proposal | September 8, 2020
AZ Coalition letter to OCC on "True Lender" proposal, submitted with CEI's Comments to the OCC (below).
CEI letter to AG and AZDFI requesting action re: Rent-A-Bank | June 19 letter, updated July 15, 2020
AZ coalition comments on FDIC Notice of Proposed Rulemaking etc. | February 4, 2020
National coalition comments on OCC Notice of Proposed Rulemaking etc. | signed by CEI, January 21, 2020
National coalition letter to OCC and FDIC opposing their support for predatory small business lender using rent-a-bank scheme | signed by CEI, October 24, 2019
CEI comment to FDIC re Small-Dollar Lending | January 22, 2019