WASHINGTON — A coalition of more than 60 consumer advocacy, civil rights, labor, small business, legal services and community organizations, along with academics, is urging the Federal Reserve to hold public hearings and conduct board-level votes on applications by two financial technology lenders seeking to acquire national banks.
According to the coalition, the Federal Reserve is reviewing an application by Enova International, which operates the CashNetUSA, NetCredit and OnDeck brands, to acquire Grasshopper Bank. The groups said the Fed is also expected to receive an application from Opportunity Financial, known as OppFi, to acquire BNC Bank.
If approved, the acquisitions would result in what the coalition described as the first national banks primarily focused on high-cost lending, with annual percentage rates ranging from 100% to 160% or higher.
‘Public Policy Concerns’
In a letter to the Federal Reserve, the groups argued that the applications raise significant public policy concerns and should be considered directly by the Board of Governors rather than delegated to a regional Federal Reserve Bank.
“A public hearing and consideration at the Board level are justified given the unprecedented nature of the applications, the unresolved policy questions that they entail, and the significant public protest raised in response to two major non-bank lenders seeking to circumvent state interest rate limits,” the coalition wrote.
‘Triple-Digit Interest Rates’
The groups contend that the proposed transactions are unprecedented because they would create national banks whose business models are centered on lending products with triple-digit interest rates, loans that they said would be prohibited in as many as 45 states depending on loan size, and products characterized by high charge-off and refinancing rates.
According to the coalition, charge-off rates on the loans can range from 50% to 60%, while frequent refinancing activity raises concerns about borrowers’ ability to repay the debt.
The organizations also pointed to what they described as broad opposition to the proposals, noting that 106 organizations previously signed a separate letter opposing efforts by Enova and OppFi to become national banks.
“Before the Board considers these unprecedented applications and makes a decision that could devastate consumers nationwide, it is incumbent on the Board to hear from the communities that will be impacted,” the groups said.
The Federal Reserve has not yet announced whether it will hold public hearings on either application.
