Attorney General Bonta Urges Federal Government to Protect Consumers, Deny Opportunity Financial Merger
OAKLAND — California Attorney General Rob Bonta today joined a coalition of 17 attorneys general in sending letters to the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board (FRB), urging the agencies to deny Opportunity Financial's (OppFi) application to acquire and merge with BNC National Bank, which would grant OppFi a national bank charter and aid its efforts to evade longstanding state lending laws. In their letters, Attorney General Bonta and the coalition argue that if OppFi gains a national bank charter and becomes a bank holding company, it would create an exponential increase of unaffordable, high-cost loans that would pose significant risk to consumers and small businesses, as well as to the banking system as a whole.
“States across the country including California have strict laws on the books to protect consumers from being taken advantage of by predatory lenders. Now, some of these nonbank lenders are seeking to exploit federal banking charters in an attempt to bypass state limits on high-cost, predatory lending,” said Attorney General Bonta. “Today, I urge the federal government to deny the proposed merger between Opportunity Financial and BNC National Bank, which would expose vulnerable consumers to harm.”
OppFi is an online lender that targets consumers with financial struggles or low credit scores and offers installment loans with interest rates reaching nearly 200% APR. While OppFi advertises its loans as affordable and claims it provides a pathway to a better financial future, the reality is that many OppFi borrowers default and become trapped in a cycle of debt. Forty-five states and the District of Columbia have state laws that prohibit such high interest rates. In California, for example, it is unlawful to issue consumer loans with APRs above 36%. OppFi has attempted to circumvent these laws through sham “rent-a-bank” arrangements, where it partners with banks in jurisdictions with no interest rate cap and claims that those banks make loans under their names, even though OppFi is the true lender and subject to state law.
To expand its high-cost lending and avoid the legal challenges involved in rent-a-bank partnerships, OppFi now seeks to acquire and merge with nationally chartered BNC National Bank to gain a national bank charter. If regulators allow this transaction, it's clear that the company will take advantage of the National Bank Act to charge rates in excess of what would be allowed by state law. Allowing a predatory lender to do this would set a dangerous precedent, put borrowers at risk, and allow banking practices that would threaten the safety and soundness of the national banking system.
Joining Attorney General Bonta in sending these letters are attorneys general of Arizona, Connecticut, the District of Columbia, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, North Carolina, Oregon, Rhode Island, Vermont, Virginia, and Washington.
Last month, Attorney General Bonta sent two letters to financial regulators sounding the alarm over attempts by predatory nonbank lenders to circumvent state laws by forming sham partnerships with national banks — or attempting to become national banks themselves. In the first letter, Attorney General Bonta and a coalition of 20 attorneys general called on the OCC, FRB, and the Federal Deposit Insurance Corporation to prevent predatory lenders from engaging in these actions in order to bypass state consumer protections. In the second letter, Attorney General Bonta and a coalition of 15 states called on the FRB to hold a hearing regarding the application of Enova International, a predatory, high-cost lender, to acquire Grasshopper Bank given concerns that the transaction is intended to allow Enova to evade state lending laws.
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