Two new proposals from the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) could make it easier for payday and other high-cost lenders to use banks as a fig leaf, allowing online lenders to offer predatory loans at interest rates that are prohibited under state law. Online lenders have become increasingly bold in using “rent-a-bank” schemes to offer loans up to 160% in states where their rates are illegal.
“The FDIC and OCC proposal will encourage predatory lenders to try to use rent-a-bank schemes with rogue out-of-state banks to evade state laws that prohibit 160% loans,” said Lauren Saunders, associate director of the National Consumer Law Center. Saunders added that states have had the power to limit interest rates since the time of the American Revolution, and urged state lawmakers to act to protect consumers.
NCLC is helping lead the fight against predatory lending, and urges you to ask your representatives to take action against rent-a-bank schemes and other high-cost lending practices. You can also visit NCLC’s website to learn more about NCLC’s work to curtail rent-a-bank schemes.