WASHINGTON — The National Consumer Law Center is applauding Enova International’s decision to abandon its proposed acquisition of Grasshopper Bank, a transaction the consumer advocacy group had argued could allow the lender to make loans carrying interest rates of 100% annually nationwide.
The NCLC was among a coalition of consumer groups that had urged Congress and federal banking regulators to oppose the acquisition, contending Enova could use a national bank charter to avoid state interest-rate limits.
“Enova intended to use a national bank charter to make loans with 100% annual interest across the country that virtually every state forbids,” said Lauren Saunders, senior attorney at the National Consumer Law Center. “Triple-digit interest rate lenders should not be allowed to turna national bank charter into a license to prey on people struggling to make ends meet.”
Enova Cites Regulatory Environment
According to the NCLC, Enova’s announcement suggested the Federal Reserve Board and Office of the Comptroller of the Currency, whose approvals would have been required for the transaction, were not likely to approve the application.
Enova cited what it described as a lack of “clear standards” governing nonbank companies seeking to become banks, as well as the effect of outside advocacy, according to the consumer group.
The NCLC characterized Enova as a predatory lender and argued banking regulators should closely scrutinize lenders with high borrower default rates.
“Bank regulators have good reason to look critically at predatory lenders with enormous default rates,” Saunders said.
Saunders also called on OppFi, another online lender, to abandon what she described as its own national bank ambitions. The NCLC said OppFi offers loans with annual percentage rates as high as 195%.
House Bill Draws NCLC Opposition
The development comes as the House Financial Services Committee is scheduled Wednesday to consider H.R. 7866, legislation the NCLC said would protect Enova’s existing lending model.
The consumer group contends Enova currently works with out-of-state, state-chartered banks to originate loans that can carry rates above limits imposed by borrowers’ home states. Consumer advocates sometimes refer to such arrangements as “rent-a-bank” lending, while lenders and banks have defended bank-partnership models as a way of expanding access to credit.
The NCLC said H.R. 7866 would help preserve the ability of lenders using those arrangements to apply the interest-rate rules of the originating bank’s state rather than those of the borrower’s state.
“Congress shouldn’t unleash predatory lenders on people who are already experiencing record debt, rising prices, and an affordability crisis,” Saunders said.
Congress Urged to Reject Bills
Saunders called on Congress to reject legislation supporting such lending arrangements, enact a national interest-rate cap and eliminate the ability of banks to override state interest-rate limits when lending across state lines.
The NCLC and other organizations previously urged Congress in May to oppose loans carrying annual percentage rates of 100% or more.
