A coalition of interest groups wants US regulators to investigate more banks working with fintechs to charge predatory interest rates that would otherwise be illegal in lenders’ home states, Bloomberg reported on Friday (February 4).
in one Letterthe National Community Reinvestment Coalition, the NAACP and several other groups said the Federal Deposit Insurance Corp. (FDIC) and other agencies should crack down on banks that offer “expensive robbery loans” in their work with fintech companies.
The letter comes after Congress last year repealed the Office of the Comptroller of the Currency’s (OCC) Trump-era “true lender” rule, which made it easier for banks to partner with FinTechs without the government’s interest rate limits hurt.
By signing this bill into law, President Joe Biden said it would be easier to protect borrowers from predatory lenders who have found ways to circumvent rules and trap people in debt cycles.
The FDIC has not done the same — instead, the coalition posits, the FDIC is not doing much to curb predatory lending, which has surged in recent months, and lets banks use their charters to allow these practices.
“Rent-a-bank programs have thrived at FDIC banks in recent years and it is about time this ended,” the coalition said in the letter to heads of the FDIC, the OCC and the Consumer Financial Protection Bureau (CFPB).
“The FDIC has the tools it needs to prevent its banks from confronting predatory lenders who evade state laws and issue extremely expensive installment loans and lines of credit,” the letter continues, with annual effective interest rates of up to 225%. .
In 2020, PYMNTS wrote that predatory lending was a problem for gig workers. Gig work, including deliveries for companies like Uber and others, has created tons of jobs in recent years, and with that comes a need for gig workers to protect themselves from predatory payday lenders.
Related: Saving gig workers from predatory lenders