Regulators need to deny the application of lender Opportunity Financial, or OppFi, to acquire a national bank, because OppFi could offer loans up to 195 percent APR and payday loan apps carrying even higher interest rates in every state, a coalition of 123 consumer, civil rights, legal services, and community organizations and academics urged federal government regulators.
The coalition asked the Federal Deposit Insurance Corp., or FDIC, Office of the Comptroller of the Currency, and Board of Governors of the Federal Reserve System to hold public hearings on the application, provide more information from OppFi on the impact of its unaffordable loans on struggling families, and – considering OppFI’s lending record – deny the application.
The Center for Responsible Lending, or CRL, also filed a separate comment letter to the FDIC that provides an in-depth argument on how the application “significantly fails to meet statutory factors under the Bank Merger Act.” Earlier this year, CRL released a report, “Lost Opportunities: How OppFi Traps Borrowers in Unaffordable Debt.”
The coalition’s letter argues that allowing OppFi to acquire BNC Bank would be an unprecedented use of a national bank charter to create a business model built on usurious and destructive loans that have no place in the national bank system. The letter points out:
- OppFi’s rates typically reach 160 percent and as high as 195 percent. Loans at those rates are debt traps, not responsible credit.
- OppFi’s interest rates are illegal in up to 45 states, depending on the size of the loan.
- OppFi’s charge-offs are more than 55 percent, proof of its irresponsible lending. This rate of charge-offs, a measure of amount defaulted on, has never been tolerated at national banks.
- OppFi’s frequent refinancing promotes long-term debt and disguises defaults. As much as 75 percent of OppFi’s pre-tax income comes from refinancing, and about half of OppFi customers refinance, sometimes multiple times and within two or three months of taking out the loans. Between defaults and refinances, few OppFi borrowers repay their loans in full on the loan’s original terms.
“There is an enormous gap between the destructive, usurious rates that OppFi charges and the top rates allowed by nearly every state,” the groups wrote. “OppFi’s lending program is risky, unsafe and unsound.”
They warn that approval of OppFi’s application would injure and threaten the national bank charter: “The charter would become a vehicle for predatory lending outlawed in nearly every state. National banks as a whole could also face a backlash that amplifies calls to pass legislation to end the preemption powers of national banks.”
The letter follows similar opposition to a pending request from Enova, owner of CashNetUSA, NetCredit and OnDeck, which issues loans around 100 percent APR, to become a national bank.
Though Enova and OppFi try to evade some state interest rate laws, they’re currently required by law to comply with them. But if they become national banks, Enova and OppFi could, under current law, evade state interest laws, the coalition said.
