Community Reinvestment Act
Advocates Urge FinWise Bank FDIC Downgrade for Predatory Lending
A coalition of consumer advocates have submitted a letter to the Federal Deposit Insurance Corporation (FDIC) calling for the downgrade of the Bank because of Community Reinvestment Act (CRA) violations. They argue that FinWise Bank’s lending through American First Finance, Elevate, and Opportunity Financial (OppFi), offering loans at up to 160% APR, "raises serious consumer protection issues and fails to meet the convenience and needs of the communities it serves." Under FDIC rules, banks are responsible for risks arising from third-party relationships to the same extent as if the activity were handled by the bank.
The advocates’ comments pointed out that American First Finance has twice as many complaints to the Consumer Financial Protection Bureau (CFPB) as EasyPay, whose partner Transportation Alliance Bank was downgraded by the FDIC in early 2023 because or deceptive acts/practices by a partner, probably EasyPay Finance. FinWise Bank’s partner American First Finance operates similar to EasyPay Finance, providing predatory puppy loans and other deceptive, high-cost loans through retail stores for pets, furniture, auto repairs, and appliances.
Two of FinWise Bank’s other rent-a-bank lenders, Elevate and OppFi, have rates significantly over 50% for charge-offs, a measure of debts unlikely to be collected, showing high-rates of default and the predatory nature of their loans. FinWise Bank, chartered in Utah and FDIC supervised, is one of only a few rogue banks that front for predatory lenders. Most states have interest rate limits to stop predatory lending, but predatory lenders try to evade state laws by laundering their loans through banks, which are exempt from state rate caps.
The advocates submitted public comments evidenced how FinWise Bank partners American First Finance, Elevate, and OppFi have generated hundreds if not thousands of complaints to the Consumer Financial Protection Bureau (CFPB) about: (1) Deception and unaffordable interest rates on loans that borrowers are unable to repay; (2) Receiving loans that they never applied for and identity theft; (3) Improper debt collection tactics, including collecting debt not owed, failure to validate debts, harassment, and abuse; and (4) Credit reporting problems, including incorrect information and failure to respond to disputes and errors.
The letter was signed by Accountable.US, Americans for Financial Reform, Center for Responsible Lending, Consumer Action, Consumer Federation of America, National Community Reinvestment Coalition, NCLC (on behalf of our low-income clients), Public Citizen, U.S. PIRG, and Woodstock Institute.
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Read the March 15, 2023 Consumer Federation of America release.
