Utah banks targeted for predatory loan laundering
UTAH (ABC4) – With the Federal Deposit Insurance Corporation (FDIC) under new management and following a departure from the company’s chairmanship on Friday, advocates are calling on the FDIC to stop some Utah banks from “coping to predatory lenders”.
The four banks in Utah are FinWise Bank, Capital Community Bank, First Electronic Bank, and Transportation Alliance Bank. The attorneys’ letter also cites Republic Bank & Trust of Kentucky and Lead Bank of Missouri. Each of the six banking regimes is featured in the letter.
The coalition of consumer and civil rights organizations is calling on the FDIC to “stop allowing its supervised institutions to promote predatory lenders who circumvent state interest rate limits.”
The interest rates these organizations are terminating can allow for loans of up to 225% APR, a press release says.
The groups call these programs “rent-a-bank” and claim they exploit financially vulnerable families.
The letter that was sent to the FDIC board calls for a crackdown on “six rogue banks,” including the four from Utah.
According to the letter, these banks “face high-cost non-bank consumer lenders, allowing loans of up to 225% APR that are illegal for the non-bank lender to provide directly. In a bank leasing system, a company that is not a bank operates a loan program and takes most of the profits, which a bank nominally approves and initially funds by placing its name on the loans. This arrangement helps the real lender (the non-bank company) to escape state interest rate limits, which do not apply to banks.
Proponents say in the letter that “these bank leasing systems often operate under the guise of innovative ‘fintech’ products, even though their high-cost, high-default business model inflicts damage similar to that inflicted by payday lenders. traditional”.
Advocates also point to President Joe Biden’s pledge to no longer allow the bills a bipartisan vote in Congress disapproving them, broad bipartisan opposition to the state rate evasion, a recent action by the Office of the Comptroller of the Currency to stop leasing a bank loans, and many reasons why the FDIC, as the watchdog of the banks, has the responsibility to stop these illegal operations.
“Two decades ago, the FDIC, along with other banking regulators, used its supervisory and enforcement powers to prevent banks from helping short-term payday lenders evade the law,” the letter explains. . “Now is the time for the FDIC to end modern predatory bank leasing schemes involving longer-term loans that set an even bigger and deeper debt trap.”
The letter also states that these three-digit installment loans are illegal in almost all states – Utah has no rate cap.