Twenty state attorneys general want regulators to put the kibosh on two deals in which high-cost nonbank lenders seek to buy banks, deals the attorneys general say incentivize predatory lending and leave consumers vulnerable to harm.
In a letter to the heads of the Office of the Comptroller of the Currency, Federal Deposit Insurance Corp. and Federal Reserve, attorneys general led by Kwame Raoul of Illinois called attention to high-cost lender Opportunity Financial’s $130 million purchase of an Arizona bank and high-cost lender Enova’s $369 million purchase of Grasshopper Bank.
State attorneys general have historically detected dangers to the financial system before the harm came to fruition, including subprime mortgages before the 2008 financial crisis, they noted.
“Now, we sound the alarm again,” they wrote.
“As the regulators that manage national bank charters, bank holding companies, and deposit insurance, you collectively determine who is allowed access to national banking privileges and what responsibilities and conditions they must meet,” they wrote. “We urge you to prohibit such access to entities that have a track record of brazenly attempting to evade state law and disregarding consumer protections.”
Attorneys general from Arizona, California, Colorado, Connecticut, District of Columbia, Hawaii, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont and Washington joined Illinois’ Raoul.
Nearly every state in the U.S. has an interest-rate cap, many at 36% for small loans and lower for large loans, they noted.
“This unequivocally demonstrates the will of the people — regardless of political party — to prevent unaffordable lending,” they wrote.
Enova and OppFi partner with banks chartered in states with no interest rate caps, the attorneys general wrote, allowing them to offer loans with interest rates well beyond 36%.
“These arrangements are deliberate efforts to avoid state usury laws and to extract profit from those that are in desperate need of money,” they wrote.
Spokespeople for Enova and OppFi defended their operations and their respective proposes acquisitions in emailed statements to Banking Dive.
"We currently serve our customers with a highly compliant, legally robust, and consumer-friendly product," an OppFi spokesperson said. "Moving this model into a regulated banking infrastructure will enable us to pair our proven product with extensive federal oversight, further strengthening our commitment to transparent and fair consumer lending."
Enova Chief Strategy Officer Kirk Chartier wrote that "[i]n contrast to the letter, 21 different state attorneys general recently filed an amicus brief in federal appellate court defending a state bank’s right to export home-state interest rates," noting that as a national bank, 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 attorneys general also called out regulators for granting national trust charters to cryptocurrency firms, saying such expansion “will amplify risk and instability to the financial system by embedding these risky business models into the fabric of the financial system” and “trigger a race to the bottom.”
Bank trade groups, too, have spoken out against national trust charters being granted to cryptocurrency firms.
Comptroller of the Currency Jonathan Gould told Banking Dive in October that “it’s better for it to be done within the banking system, if it’s legally permissible and can be done in a safe and sound manner, so that we can see it and monitor it, versus an ostrich approach, where we put our head in the sand and we’re not really observing what’s going on out there.”
Editor’s Note: This story has been updated to include comments provided by OppFi and Enova.
