Borrower Beware: Fintech Lenders Offer Both Convenience and a Debt Trap

Rent-a-bank model means short-term gain, long-term pain

Andy Spears


Photo by Dmitry Demidko on Unsplash

The holiday shopping season can definitely be a time of financial stress. Consumers often turn to short-term lending solutions in order to cover the costs — but not all short-term loans are the same. Some can carry little interest and be easy to repay. Others can carry rates in the triple digits and lead to a cycle of debt.

A recent story from NerdWallet details how some lenders in the fintech space are using so-called “rent-a-bank” schemes to offer convenient loans at incredibly high (triple digit) interest rates.

Though they’re most popular online, you could also encounter rent-a-bank loans at retail stores, auto repair shops or pet stores, says Lauren Saunders, associate director at the National Consumer Law Center, which advocates for consumers and against rent-a-bank loans.

States have tried to curb high-interest lending by setting interest rate caps, but the rent-a-bank model allows loans with APRs of 150% or higher to reach people across the country. Consumer advocates and researchers say such loans can leave borrowers in long-term debt that’s difficult to repay.

Who to avoid?

Two big offenders in the rent-a-bank space are OppFi and EasyPay. EasyPay operates in the auto repair and pet industries and OppFi offers subprime, short-term installment loans.

If you’re making a purchase, you may come across EasyPay and OppFi will likely turn up in any online search for short-term loans.

Both of these are bad actors — charging triple digit rates and trapping borrowers in a cycle of debt.



Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .