Illinois-based Online Lender Lobbies to Repeal Payday Loan Interest Rate Caps

Advocate Andy

OppFi seeks to get around state law designed to protect consumers

The Chicago Sun-Times reports that online lender OppFi engaged in a shadow lobbying campaign to overturn Illinois’ new Predatory Loan Prevention Act (PLPA) which caps interest rates on payday loans at 36%.

Pritzker Signs Predatory Loan Prevention Act

The Illinois law knocked out of business those who dealt in auto-title and personal loans, payday advances and other forms of finance whose interest rates are well into the triple digits, often 400% and higher. It caused big trouble for Chicago-based Opportunity Financial, which does business as OppFi.

While online lenders like OppFi often use a “rent-a-bank” strategy to circumvent state rate caps, the Illinois law prevents OppFi from using that tactic in Illinois.

Consumer Groups Call for FDIC Action on Predatory Lending | by Andy Spears | Feb, 2022 | Medium

Groups including Consumer Federation of America (CFA) and the National Consumer Law Center (NCLC) sent a letter to the FDIC calling for action to stop these “rent-a-bank” schemes:

“FDIC-supervised banks are helping predatory lenders make loans up to 225% APR that are illegal in almost every state. These rent-a-bank schemes often operate under the guise of innovative ‘fintech’ products, even as their high-cost, high-default business model inflicts harms similar to those inflicted by traditional payday lenders…. Rent-a-bank schemes have flourished at FDIC banks in the past few years, and it is time for that to come to an end.”

The Sun-Times article notes that “rent-a-bank” is a significant portion of OppFi’s business:

Across the country, OppFi is among the most vigorous users of the rent-a-bank strategy. Its website reports it does business that way in 31 states, including Indiana, besides making loans directly in four others, including Wisconsin.

A report from suggests that OppFi has been engaged in a shadow lobbying campaign that may violate Illinois state law. The purpose of that effort? Overturning the rate caps and allowing OppFi to charge its triple-digit interest rates to borrowers in Illinois.

Consumer groups are calling out these efforts to subvert state law and highlighting the banks who frequently provide their services to allow online lenders to get around rate caps.

The Bad News Banks. Consumer groups expose banks fronting… | by Andy Spears | Feb, 2022 | Medium

Consumer advocates are aware of “six rogue banks fronting for high-cost non-bank consumer lenders, enabling loans up to 225% APR that are illegal for the non-bank lender to make directly.” Four of the banks are chartered in Utah: FinWise Bank, Capital Community Bank, First Electronic Bank and Transportation Alliance Bank (TAB Bank). The letter also cites Republic Bank & Trust of Kentucky and Lead Bank of Missouri. The high-cost lenders using banks to launder their loans include EasyPay Finance, Elevate Credit, OppLoans, the installment loan brand of the payday lender CashNetUSA, and the auto title lender LoanMart, among others.

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Andy Spears is a middle Tennessee writer and policy advocate. He reports on news around public policy issues - education, health care, consumer protection, and more.

Nashville, TN

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