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

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

Andy Spears
2 min readDec 5, 2022
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…

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Andy Spears
Andy Spears

Written by Andy Spears

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

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