Summary
Consumer Advocates Urged FDIC to Downgrade the Bank’s CRA Rating Over its Triple-Digit Interest Rate Rent-a-Bank Loans, Deceptive Marketing
Late last week, the Federal Deposit Insurance Corporation (FDIC) made public that it has downgraded the Community Reinvestment Act (CRA) performance rating of Transportation Alliance Bank (TAB Bank) to “needs to improve,” a low rating that few banks get.
The FDIC came to the same conclusion that prompted consumer advocates including the National Community Reinvestment Coalition (NCRC) to write to the agency urging a downgrade in early 2022: The Utah-based bank committed unfair or deceptive acts or practices that “impacted a large number of consumers over an extended period of time.”
“CRA calls on banks to meet the convenience and needs of the communities where they do business,” said Adam Rust, senior policy advisor for the National Community Reinvestment Coalition. “That starts with not using a bank charter to facilitate harmful and deceptive lending practices. We commend the FDIC for taking this step to hold TAB accountable.”
Consumer advocates had urged the FDIC to downgrade the bank for offering predatory credit that does not meet the convenience and needs of communities, and provided evidence that TAB Bank was facilitating predatory puppy loans, predatory auto repair loans, and predatory loans to servicemembers and veterans. Through a “rent-a-bank” partnership with EasyPay Finance, the bank helped EasyPay make loans up to 189% APR in states where that rate is illegal for nonbank lenders. Hundreds of consumers have lodged complaints about these loans, describing payments that mostly go to interest, deceptive interest-free promotions, debt collector harassment, and credit reporting problems.
“TAB Bank has been disserving the community through its predatory rent-a-bank loans and deserves this downgrade,” said Lauren Saunders, associate director of the National Consumer Law Center. “No bank should help predatory lenders evade state interest rate laws and make destructive loans that put people in a debt trap.”
The public portion of TAB Bank’s evaluation identifies a violation of the Federal Trade Commission Act’s prohibition of unfair or deceptive acts or practices (UDAP).
TAB Bank is one of six rogue banks that consumer groups have urged the FDIC to stop from laundering triple-digit interest rate loans that are issued by nonbank lenders to evade state interest rate laws.
“TAB Bank has a record of enabling harmful rent-a-bank loans for auto repairs, pet purchases, and other retail purchases,” said Rachel Gittleman, financial services outreach manager for Consumer Federation of America. “This downgrade is an important first step, but we encourage the FDIC to stop TAB bank and others from peddling predatory loans into the communities that they are supposed to serve.”
The CRA, or Community Reinvestment Act, is a 1977 law intended to encourage insured banks and thrifts to meet local credit needs, including those of low- and moderate-income neighborhoods, consistent with safe and sound operations.
“In lowering TAB Bank’s CRA score, the FDIC sent the message that banks engaged in predatory lending practices will face negative consequences,” said Nadine Chabrier, senior policy counsel at the Center for Responsible Lending. “We urge the FDIC to take additional steps to stop all banks it regulates from harming consumers through rent-a-bank schemes.”
Additional Resources
- Read the CRA Comment: 40 Groups Urge FDIC To Downgrade TAB Bank, June 30, 2022
- Report: Predatory Puppy Loans by TAB Bank and EasyPay Finance; Press release, February 2022
- Letter to FDIC from consumer groups urging crackdown on predatory rent-a-bank lending, Feb. 4, 2022
- Report: Predatory Auto Repair Loans by TAB Bank and EasyPay Finance, May 11, 2022
- Letter to national auto repair chains urging them to stop offering loans through EasyPay and TAB Bank, May 11, 2022
- Report: Predatory Lenders TAB Bank and EasyPay Finance Harm Veterans and Military Servicemembers with Loans up to 189% APR; Press release, May 25, 2022
- Letter to FDIC from consumer groups urging crackdown on predatory rent-a-bank lending, Feb. 4, 2022
