Dear Congress: get rid of the rent-a-bank ruse

Dear Congress: get rid of the rent-a-bank ruse

The present push by payday lenders to try to outflank state laws and regulations is but one explanation Congress has to work on an innovative new proposition that will cap interest levels at 36%.

Contemporary payday lenders — providing the credit that is high-interest happens to be called today’s loan sharking and that were only available in the 1990s — have found methods to circumvent state rules that prohibit or restrict exorbitant interest levels, sometimes rates outstripping 500%.

Payday loan provider contrivances simply simply simply take numerous kinds, but one specific unit merits attention since it’s distributing.

It’s called rent-a-bank, or charter renting. Federal legislation on banking institutions, which simply just simply take deposits, topic them and then the usury legislation for the state where the bank relies.