Washington, D.C. — The battle to stop banks from renting their charters to payday lenders has moved to the Office of Thrift Supervision as local and national consumer and community groups launched a campaign to stop the nation’s only thrift now making payday loans. Payday loans are quick cash loans based on the borrower’s personal check held for future deposit that cost triple digit interest rates. Advocates argue that payday lending abuse is based on repeat transactions that capture borrowers on a debt tread mill.
“Federal charter preemption privileges of banks and thrifts are being abused by payday lenders who partner with banks to evade state consumer protections. We petition the Office of Thrift Supervision to stop the payday lending affiliation of First Place Bank with Check’n Go,” stated Jean Ann Fox of Consumer Federation of America (CFA).
Over fifty local and national consumer and community organizations petitioned the Director of the Office of Thrift Supervision to halt First Place Bank of Warren, Ohio from renting its thrift charter to payday lender Check’n Go of Mason, Ohio. Citing the OTS’s own policy advisory statements issued jointly with the Office of the Comptroller of the Currency in 2000, advocates charge that the payday lending activities of First Place Bank pose unacceptable levels of risk for safety and soundness and reputational risk.
“While we anticipate that regulators will respond negatively to First Place Bank’s payday lending activities, we can promise that the bank will experience reputational damage associated with usury and predatory lending practices,” stated Peter Skillern, Executive Director of the Community Reinvestment Association of North Carolina (CRA*NC). CRA*NC has promised a sustained public campaign to pressure the bank to exit payday lending.
First Place Bank partners with Check’n Go to make payday loans in Texas, charging $20 per $100 lent or more than 500% interest for loans due in two weeks. These loan terms are prohibited by Texas law governing small consumer loans, but First Place claims the right under federal law to export these usurious rates for loans made by Check’n Go in Texas.
The Office of the Comptroller of the Currency took regulatory action in 2002 against three of the four national banks it regulates that were involved in payday lending. Most recently, ACE Cash Express stopped making payday loans with Goleta National Bank. In September 2002, the Federal Deposit Insurance Corporation stopped Brickyard Bank, an Illinois state bank, from making payday loans through Check’n Go in North Carolina and Texas. Check’n Go’s attempt to buy the Bank of Kenney encountered stiff opposition from public officials and advocates that appears to have stopped the acquisition. The FDIC regulates a half dozen other state-chartered banks that make payday loans through storefront companies. First Place Bank is the largest bank and the only thrift to currently participate in payday lending. The OTS gave a “Needs to Improve” rating in its Community Reinvestment Act evaluation to Crusader Bank, a federal Thrift now out of the payday lending business.
“The National Community Reinvestment Coalition and its members are adamantly opposed to misuse of federal banking powers to circumvent state laws against usury and predatory lending practices. We will use all our tools to protect consumers from this insidious form of predatory lending,” stated John Taylor, President and CEO of NCRC.
The letter from over 50 groups to the OTS is posted at www.consumerfed.org and www.ncrc.org.
Contacts:
Jean Ann Fox, CFA 757-867-7523
Peter Skillern, CRA-NC 919-667-1557 ext. 22
Rachel Maleh, NCRC 202-628-8866 ext. 3013
Consumer Federation of America is a non-profit association of about 300 pro-consumer organizations.
Community Reinvestment Association of North Carolina is a nonprofit bank watchdog agency based in Durham, NC.
NCRC is a national not-for-profit membership organization working for economic justice and fair access to credit, capital and financial services.