Congress needs to stop predatory bank loans by opposing the national bank applications of Enova and OppFi, to adopt a national interest rate cap, and to support the right of states to establish rate limits, including stricter caps, nearly 100 consumer, civil rights, and community organizations said in letter sent Thursday.
“Strong bipartisan majorities of the American public support interest rate limits, which are the simplest and most effective way to stop unaffordable lending,” the groups wrote. “But the Trump Administration and some members of Congress are considering measures that would spread loans of 100% to 160% APR and higher across the country in defiance of laws in both red and blue states.”
Congress should instead defend and restore interest rate limits to prevent unaffordable lending, the letter states.
The letter urges Congress to:
- Stop Enova – owner of CashNetUSA, NetCredit, and OnDeck – and OppFi from becoming national banks, which would allow them to ignore interest rate limits by states.
- Enact a national 36 percent rate cap, while allowing states to set lower limits.
- Eliminate loopholes that exempt banks from state interest rate laws and oppose a bill to expand bank exemptions.
Enova is a nonbank lender that charges interest rates that can reach 100% to 300% APR through its NetCredit and CashNetUSA brands. More than half of Enova’s loans are charged off, demonstrating the unaffordability of Enova’s loans and its failure to assess borrowers’ ability to repay their loans, the Center for Responsible Lending, or CRL, an advocacy group, said in a statement, adding Enova also makes very problematic high-cost small business loans through OnDeck.
OppFi, also a high-cost nonbank lender, charges rates of 160% APR and higher. A recent CRP report, “Lost Opportunities,” showed how frequent reborrowing is built into OppFi’s business model, the company anticipates that up to one third of its borrowers will default, and many OppFi borrowers also borrowed other high-cost forms of credit at the same time, a sign of financial distress.
Currently, Enova and OppFi need to comply with state interest rate laws. But Enova and OppFi have sought permission from the Office of the Comptroller of the Currency and Federal Reserve Board to buy, and then become, national banks, which can, under current law, evade state interest laws.
“These would be the first national banks dedicated to directly making predatory loans and could open the national bank charter to a host of other predatory lenders,” the groups warned. “Approval of predatory 100%+ APR banks would be an assault on people across the country and political spectrum who are worried about the affordability crisis and strongly support interest rate limits.”
The letter also urges Congress to oppose Senator Bernie Moreno’s (R-Ohio) American Lending Fairness Act, which would halt the ability of states to stop predatory lending by out-of-state, state-chartered banks, and to support Senator Sheldon Whitehouse’s (D-RI) Empowering States’ Rights to Protect Consumers, which would require national and state banks to comply with state interest rate caps. The letter also encourages support for Senator Jack Reed’s (D-RI) Predatory Lending Elimination Act, which extends the protections of the Military Lending Act to veterans and other consumers, capping interest rates at a maximum of 36 percent APR.
“With people struggling to make ends meet, the last thing they need is predatory bank lending,” the groups wrote. “Congress needs to step up to address the affordability crisis by stopping banks from making high-cost loans, restoring and defending the ability of states to protect people, and capping interest rates nationally.”
