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Consumer Groups Call for FDIC Action on Predatory Lending
Groups call out FDIC-backed banks for acting as “front groups” for payday lenders
The Consumer Federation of America (CFA) was joined by more than a dozen other consumer advocacy groups in calling on the Federal Deposit Insurance Corporation (FDIC) to take action against predatory lending.
“Last year, Congress took a stand against the harmful rent-a-bank model that is being used by predatory payday and installment lenders to make triple-digit interest rate loans that are illegal across the country by overturning the “fake lender” rule,” said Rachel Gittleman, Financial Services Outreach Manager with Consumer Federation of America. “But rent-a-bank lenders are alive and well, using a few FDIC-regulated banks to peddle predatory loans to consumers throughout the country. The FDIC must stop permitting its supervised banks from engaging in this harmful behavior.”
In a letter, the groups said:
“FDIC-supervised banks are helping predatory lenders make loans up to 225% APR that are illegal in almost every state. These rent-a-bank schemes often operate under the guise of innovative ‘fintech’ products, even as their high-cost, high-default business model inflicts harms similar to those inflicted by traditional payday lenders……
