Utah Bank Called Out for Laundering Loans for Payday Predator
The District of Columbia yesterday announced a settlement with online lender Elevate that will refund millions of dollars to consumers. The agreement was reached as a result of Elevate violating interest rate caps in DC — the maximum rate for a loan there is 24%.
In order to get around the rate cap, Elevate partnered with a Utah bank known as FinWise. Utah’s ABC4 has more:
Elevate Credit, Inc. (Elevate) was laundering loans with up 149% APR to D.C. consumers through Utah FinWise Bank to evade DC’s interest rate limits.
Elevate was charging 99% to 149% interest on installment loans in DC despite the District’s 24% interest rate cap.
Consumer advocates were quick to condemn FinWise for their complicity in the rent-a-bank scheme:
“Utah’s FinWise Bank was helping the predatory lender Elevate to make loans up to 149% APR that are illegal in DC, but the DC Attorney General showed that states can stop rent-a-bank schemes enabled by rogue Utah banks,” said Lauren Saunders, associate director at the National Consumer Law Center. “The FDIC now must stop FinWise Bank and three other Utah Banks — Capital Community Bank, First Electronic Bank, and TAB Bank — from fronting for predatory lenders across the country.”
In a letter to regulators, consumer groups including Consumer Federation of America and National Consumer Law Center called for further action to stop banks from enabling predatory lending:
“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.”