Senators tell FDIC to Stop Letting Payday Lenders Rent Bank Charters

July 21, 2004
Jean Ann Fox, CFA 757-867-7523

Washington, DC - Consumer Federation of America (CFA) applauded Senator Charles Schumer and five other Senators for contacting Donald Powell, Chairman of the Federal Deposit Insurance Corporation, to end the misuse of federally insured state banks to help payday lenders evade state usury and small loan laws.

Payday loans are quick cash loans at triple-digit interest rates based on personal checks or electronic access to borrowers' bank accounts due in full on the borrowers' next payday. Consumers pay $6 billion a year to borrow $40 billion in payday loans. Consumers targeted by payday lenders are low to middle income, military, and minorities.

"Federal bank regulators put a stop to their banks partnering with payday lenders due to unsafe and unsound practices," Jean Ann Fox, CFA director of consumer protection, said. "Only the FDIC permits ten FDIC-insured state banks to participate in the payday loan business."

Payday lenders, including eleven of the thirteen largest companies in the industry, "rent" bank charters to get around state usury and small loan laws intended to protect cash-strapped consumers from predatory loans. Payday lending is illegal in over a dozen states and restricted by state law in others. States, such as New York, New Jersey, North Carolina, Texas, Pennsylvania, Georgia and Maryland try to protect cash-strapped borrowers but have been invaded by payday lenders and their partner banks willing to rent their charters.

"The FDIC guidelines on payday lending do not take the place of state consumer protections," stated Ms. Fox. "States cannot protect their consumers if store front lenders can evade state usury laws by partnering with banks in South Dakota and Delaware that have no limits on interest rates."

Others signing the letter to FDIC Chairman Powell include Senators Sarbanes, Levin, Durbin, Corzine, and Clinton.

The Consumer Federation of America is a nonprofit association of 300 consumer groups, established in 1968 to advance the consumer interest through research, education, and advocacy.

CFA Payday Loan Rent-a-Bank Fact Sheet

FDIC State Banks That Partner with Payday Lenders

  • County Bank of Rehoboth Beach, DE,
  • First Bank of Delaware
  • BankWest, Inc., Pierre, SD
  • First Fidelity Bank in Burke, South
  • Community State Bank, South Dakota
  • American Bank & Trust, Wessington Springs, SD
  • Bryant State Bank, Bryant, SD
  • Reliabank Dakota, Estelline, SD
  • Republic Bank & Trust, Kentucky
  • Venture Bank, Washington

Payday Lenders that Partner with FDIC Banks

Eleven of the thirteen largest payday loan chains make loans with bank partners in some states.

  • Advance America
  • ACE Cash Express
  • Check n' Go
  • Check into Cash
  • Dollar Financial Group
  • Cash America International
  • First American Holding
  • QC Financial Services, Inc., d/b/a Quik Cash
  • EZCORP, Inc., d/b/a EZPawn
  • First Cash Financial
  • FlexCheck Holdings

Source: "Unsafe and Unsound: Payday Lenders Hide Behind FDIC Bank Charters to Peddle Usury - A Report on Devices Used by Payday Lenders to Evade State Usury and Small Loan Laws," issued by Consumer Federation of America, March 30, 2004. Report is available at