Rep. Katie Porter Asks FDIC to Monitor Bank-Online Lender Partnerships
In a letter sent to Federal Deposit Insurance Corporation (FDIC) Chairwoman Jelena McWilliams last month, Representative Katie Porter (D-Calif.) requested that the agency closely examine partnerships between online lenders and banks. These partnerships have come under scrutiny after some nonbank lenders indicated that partnering with banks could allow them to continue serving customers in California after the state passed legislation implementing a rate cap of 36 percent on certain consumer loans.
“I wish to continue our conversation begun earlier this month and ask that the Federal Deposit Insurance Corporation (FDIC) heighten its vigilance in rooting out high-cost lenders that use state-chartered banks to evade state usury laws,” Rep. Porter wrote.
AB539 was passed by the California legislature and signed into law by Governor Gavin Newsom in October, capping interest rates for nonbank lenders in the state at 36 percent for consumer loans up to $10,000. Banks, savings associations, credit unions, and certain other classes of lenders are exempt from the new rules.
According to American Banker, more than 333,416 loans in 2018 were made by nonbank lenders and carried a 100 percent or higher APR—amounting to a combined value of $1.1 billion. Rep. Porter has long opposed these types of lending products.