Thursday, June 25, 2020

Bank Regulators are Paving the Way for Loan Sharks, Payday Lenders and Debt Collectors to Gouge Consumers with Sky-High Interest Rates | Better Markets

“The issue took on renewed importance after the Second Circuit ruled in 2015 that preemption of state law does not and should not apply to an independent, nonbank debt collector that buys loans from federally regulated banks. Madden v. Midland Funding, LLC, 786 F.3d 246 (2d Cir. 2015). That decision made some banks and their would-be partners nervous. They want to make sure that nonbank financial firms— ranging from online lenders to payday loan sharks and debt collectors—can continue with their “rent-a-bank” schemes, piggybacking on the charters of federally regulated banks to evade state usury laws.

“Now they have apparently prevailed on the FDIC (and the OCC) to issue rules attempting to nullify the Madden decision. As the court in Madden correctly observed, however, that essentially amounts to an “end-run” around important consumer protections that many states have seen fit to adopt.


At the bottom layer of the credit industry are predators, notwithstanding free market doctrine. They exist partly because of regulation.

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