Stop the Debt Trap

Time to Reign In Florida Predatory Lenders

High-Cost Predatory Rent-a-Bank Schemes in Florida

Florida law limits interest rates to protect its residents from predatory lending.

Unfortunately, high-cost online lenders are evading Florida law by laundering their loans through rogue, out-of-state banks, which are not subject to state rate caps. In a “rent-a-bank” scheme, a loan program is designed and run by a nonbank lender that charges and collects interest and makes the bulk of the profits.

But a bank’s name is on the paperwork, and the lender claims it is a “bank loan” exempt from state law. Predatory rent-a-bank lending hurts consumers, disabled veterans, and small business owners who can lose their homes to 121% APR loans.

These installment lenders are now using rent-a-bank schemes to evade Florida law¹: 

• EasyPay offers high-cost credit through businesses across the country that sell auto repairs, furniture, home appliances, pets, wheels, and tires, among other items. EasyPay’s website does not disclose its rates, but examples from consumers in some states include $1,500 loans at 189% APR, funneled through Transportation Alliance Bank, Inc. dba TAB Bank (Utah).
  
  
• Elevate’s Rise uses FinWise Bank or CC Bank, both of Utah, to make $500 to $5,000 loans with APRs of 99% to 149%.
  
  
• Enova, which operates the CashNetUSA payday loan stores, uses NetCredit to make installment loans of $1,000 to $10,000 with APRs up to 100% through Republic Bank & Trust of Kentucky.
  
  
• OppLoans (aka OppFi) makes $400 to $4,000 loans at 160% APR through FinWise Bank, First Electronic Bank of Utah, or CC Bank.
  
  
• Axcess Financial, which operates the Check 'n Go and Allied Cash Advance payday loan stores, uses CC Bank to offer Xact installment loans of $1,000 to $5,000 at 145% APR to 225% APR.
  
  
• Florida small businesses, including a realty company and a general contractor, have also been subject to 73% to 100% APR rent-a-bank loans by World Business Lenders. Borrowers had no contact with the bank and WBL in some cases signed the bank’s name using a power of attorney.

1. Source:  National Consumer Law Center  https://www.nclc.org/issues/high-cost-small-loans/rent-a-bank-loan-watch-list.html

The legality of rent-a-bank schemes is questionable. But in 2020, the Office of the Comptroller of the Currency approved a “fake lender” rule that prevents courts from following the money to prevent usury law evasions. A second set of OCC and FDIC rules preempting state rate caps on assigned loans also help protect high-cost loans laundered through banks. Both rules have been challenged.   

To preserve Florida’s authority to stop predatory lending, we must:

• Overturn recent FDIC and OCC rules that protect “rent-a-bank” schemes.
• Stop banks from helping high-cost nonbank lenders evade state law.
• Enact a national 36% interest rate cap covering all lenders, including banks, and allow states to set
  lower limits.