A coalition of lobby groups wants U.S. regulators to look more closely at banks’ partnerships 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 engage in “high cost predatory lending” in their work with fintech companies.
The letter comes after Congress decided last year to roll back the Trump-era Office of the Comptroller of the Currency (OCC) “true lender” rule, which made it easier for banks to partner with FinTechs. without violating state interest rate limits.
By signing this bill, President Joe Biden said it would be easier to protect borrowers from predatory lenders who had found ways to circumvent the rules and trapped people in cycles of debt.
The FDIC has not followed suit – instead, as the coalition posits, the FDIC is doing little to curb predatory lending, which has increased in recent months, leaving banks to use their charters to authorize these practices.
“Bank leasing programs have flourished at FDIC banks over the past few years and it’s time for that to end,” the coalition said in letter to FDIC, OCC and financial protection chiefs. consumers. Office (CFPB).
“The FDIC has the tools it needs to prevent its banks from dealing with predatory lenders who circumvent state law and provide extremely expensive installment loans and lines of credit,” the letter continues, with comments. annual percentage rates as high as 225%.
In 2020, PYMNTS wrote that predatory lending was a problem for gig workers. On-demand work, including deliveries for companies like Uber and others, has created tons of jobs over the past few years, and with that comes a need for on-demand workers. have security against predatory payday lenders.
Related: Saving gig workers from predatory lenders