Enova International has withdrawn its applications to the Federal Reserve and the Office of the Comptroller of the Currency to acquire Grasshopper Bancorp, the fintech disclosed Monday.
“Regulators do not have clear standards for nonbanks that want to become banks and that serve customers whose credit needs today are met mostly outside of the banking system,” Enova CEO Steve Cunningham said in a statement Monday. “Without clearly articulated standards, the process is susceptible to political pressure and outside advocacy, rather than being guided strictly by the statutory factors that should govern it.”
The comment comes amid a marked uptick in applications by fintechs to obtain banking licenses – and subsequent approvals by regulators.
The “political pressure” reference may be a nod to a July letter that 20 state and district attorneys general sent to the Fed, OCC and Federal Deposit Insurance Corp., urging the agencies to reject Enova’s proposed deal over concerns that it represented an effort “to avoid state usury laws.”
Most states have an interest-rate cap – often, 36% for small loans and lower for large loans. But Chicago-based Enova partners with banks chartered in states with no interest rate caps, allowing loans to be offered carrying higher rates, the attorneys general noted.
At the least, the AGs sought public hearings and “ample opportunity” for comment before regulators tendered a final decision on the tie-up.
Ahead of that, though, two Democrats on the Senate Banking Committee – Sens. Elizabeth Warren of Massachusetts and Chris Van Hollen of Maryland urged the Fed and OCC to deny Enova’s applications.
“Enova’s history of predatory lending and regulatory noncompliance render its application inconsistent with the standard for approval under the Bank Merger Act and Bank Holding Company Act,” the senators wrote.
Further, approving Enova’s application would “veer dramatically” from President Donald Trump’s effort to cap credit card interest rates at 10%, Warren and Van Hollen argued.
Political pushback was not limited to Enova’s proposed deal. The AGs urged regulators also to deny fellow fintech OppFi’s application to acquire Glendale, Arizona-based BNCCORP and its subsidiary, BNC National Bank, for $130 million.
In response to the AGs’ letter, Enova’s chief strategy officer, Kirk Chartier, wrote that 21 different state attorneys general had, around the same time, filed an amicus brief in court defending a state bank’s right to export home-state interest rates.
As a national bank, Chartier asserted in July, Enova “would operate under full federal banking agency supervision and consumer protections and in compliance with applicable federal and state laws and interagency lending guidance.”
The OCC and Federal Reserve did not immediately comment on the withdrawal of the Enova applications.
Cunningham, however, said “bank regulatory guidelines and attitudes have not kept pace with the realities of meeting the credit needs of tens of millions of consumers and small businesses underserved by traditional banks.”
When the $369 million deal with Grasshopper was announced in December, Enova’s then-CEO, David Fisher, said acquiring a bank had been a longtime aspiration for the fintech – dating at least to 2020, when it bought OnDeck Capital (which itself was pursuing a bank charter).
By contrast, Cunningham – who succeeded Fisher in January – said Monday that Enova’s “future growth and success do not depend on becoming a bank.”
“Enova has proven capabilities, a clear strategy and the best team in the industry,” Cunningham said. “We will continue to leverage these strengths, as well as new products and innovations, to meet the credit needs of the consumers and small businesses that traditional banks are leaving behind.”
In a press release Monday, Enova asserted it had “worked constructively and transparently with regulators, responding promptly and fully to requests and building an application that Enova believes satisfies the statutory criteria for approval.”
