The Center for Responsible Lending, which is affiliated with the Self Help credit unions, and other consumer groups challenged an alleged high-interest lender's maneuver to get a bank license.
The groups sent a letter April 22 asking Federal Reserve Chair Jerome Powell to deny an application of Enova to acquire Grasshopper Bank.
Enova International, Inc. (NYSE: ENVA), which describes itself as a "financial technology company powered by machine learning and world-class analytics," operates consumer brands CashNetUSA and NetCredit, and small business lender OnDeck.
The groups said the acquisition would create a new national bank that can legally charge more than 100% APR – even in states where those rates are prohibited for Enova and other non-bank lenders.
The groups cited the Federal Reserve's review authority under the Bank Holding Company Act (BHCA), which requires consideration of financial resources, managerial competence, the convenience and needs of communities to be served, and anti-competitive effects.
"Each of these criteria weighs against approval," the groups wrote.
Enova offers two consumer installment loan and line-of-credit products through its CashNetUSA and NetCredit brands. The groups said NetCredit rates reach 99.99% APR and CashNetUSA's go as high as 299% APR.
"Rather than lend at these levels through a FDIC-regulated bank partner, which is prohibited in up to 45 states, depending on the size of the loan, Enova seeks a bank charter so that it can ignore state interest rates and offer those rates nationally," the groups wrote.
The groups said Black and Latino communities disproportionately use non-bank, fintech installment loans and that high-cost lenders have long targeted those communities.
In 2023, the CFPB labeled Enova a "repeat offender," after finding it had continued illegal behavior after an order was issued against it in 2019. This illegal behavior included Enova withdrawing funds without borrowers' consent and deceiving borrowers with false statements and omissions.
Enova said at the time the issues "arose from unintentional technical systems and processing errors" that had already been addressed. "We remain committed to treating customers fairly and enhancing business practices to reduce errors and address issues promptly."
Besides the Durham, N.C.-based Center for Responsible Lending, the other groups signing the letter were the Leadership Conference on Civil and Human Rights, the NAACP Legal Defense Fund and the National Consumer Law Center.
Contact Jim DuPlessis at Jim.DuPlessis@arc-network.com.
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