Consumer Groups Call for FDIC Action on Predatory Lending

Groups call out FDIC-backed banks for acting as “front groups” for payday lenders

Andy Spears
2 min readFeb 4, 2022


Photo by Giorgio Trovato on Unsplash

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…. Rent-a-bank schemes have flourished at FDIC banks in the past few years, and it is time for that to come to an end.”

In a rent-a-bank lending scheme, a company that is not a bank runs a lending program and takes most of the profit, but a bank nominally approves, initially funds, and puts its name on the loans. This arrangement helps the true lender — the nonbank company — to evade state interest rate limits, which don’t apply to banks.

Congress Has Taken Steps to Rein-in Rent-a-Bank Schemes

Following a bipartisan Senate vote in May that approved legislation to overturn a Trump-era policy that allowed predatory payday lenders to get around state interest rate caps by using so-called “rent-a-bank” schemes, advocates are now calling for swift House action on the measure.

The National Consumer Law Center sent the following message to supporters:

The U.S. House could soon vote on a resolution to overturn the “fake lender” rule, which protects rent-a-bank schemes where predatory consumer and small business lenders charge interest rates of up to 200% APR, evading state- and voter-approved rate caps. Recently passed 52–47 in the Senate, and introduced in the House by Rep. Jesús “Chuy” García (D-IL), the Congressional Review Act resolution of disapproval (H.J. Res. 35/S.J. Res. 15) would overturn the “fake lender” predatory lending rent-a-bank rule.

Consumer Advocates Call on House to Overturn “Fake Lender” Rule | by Andy Spears | Medium



Andy Spears

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