NAFCU raises rent-a-bank, fintech chartering concerns

NAFCU Vice President of Legislative Affairs Brad Thaler reiterated the association’s concerns about companies taking advantage of regulatory loopholes and chartering schemes to expand their reach in the U.S. financial system ahead of today’s Senate Banking Committee hearing on rent-a-banks. Thaler urged lawmakers to consider the risks these trends pose to consumers and the financial system.

Thaler cited the Office of the Comptroller of the Currency’s (OCC) true lender rule as contributing to the reemergence of rent-a-bank schemes, which allows banks and federal savings and loan companies to provide their charter to online lenders so they can deliver high-cost loans with annual rates over 100 percent, evading state consumer protections and usury caps and promoting predatory payday lending. Several states have filed suit against the OCC to try to overturn the rule.

“These predatory payday lenders are operating on an uneven playing field, relying upon the benefits of the OCC’s federal preemption to circumvent consumer protections and place borrowers in harms’ way,” Thaler wrote. “What is most concerning is the lasting damage this form of wealth extraction has on household financial security and on communities. Given the damage caused by these high-cost, unaffordable loans to borrowers’ balance sheets, it limits the ability for legitimate and responsible lenders to support those households and communities with productive credit.”


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