Online Lenders Alliance (OLA) Executive Director Andrew Duke issued the following statement in response to the letter issued by the Center for Responsible Lending (CRL) and the Consumer Bankers Association (CBA) petitioning the CFBP to engage in rulemaking to define larger participants in the market for personal loans:
“CFPB rulemaking should be based on comprehensive data, and not based on the distorted view of the consumer lending market as portrayed by this letter.
“The CBA/CRL letter is correct in pointing out the large demand for access to shorter term, smaller dollar credit offerings in the U.S.—especially among the one-third of Americans who have non-prime credit scores. Unfortunately, this letter conveniently omits the fact that banks and credit unions don’t come anywhere close to offering the products at scale to meet consumer demand—primarily citing cost and regulatory uncertainty as the reasons for not offering these products (GAO).
“Data shows that consumers are increasingly turning to the alternative financial services marketplace—especially fintech lenders—to meet their financial needs. This trend indicates that consumers see these lenders as the best available option to meet their needs, and it demonstrates that there is a growing level of offerings and competition in the marketplace (a concept that Director Chopra has repeatedly championed).
“This letter also relays an incomplete and distorted view of the of the current consumer lending market. Persistent high levels of inflation are putting inordinate pressure on household finances. Some lenders that have artificially capped APRs on their consumer loan products below 36% have responded to this dynamic by reducing access to credit to those who are most challenged—offering real time evidence that rate caps do not lower the cost of borrowing, they only lessen the availability of credit.
“The letter also presents a misleading and incomplete depiction of bank-fintech relationships. Small community banks are increasingly teaming up with fintech firms to offer new and innovative credit products and financial services to more consumers. In so doing, smaller banks can better compete with the nation’s large banks, which fulfills a CFPB objective of fostering competition in the marketplace. This letter conveniently ignores the fact that fintechs operating as a service provider to the banks are already rigorously supervised by the OCC and FDIC—as well as state regulators, which ensures consumer safety and protection.
“Ultimately, this letter ignores the fact that non-bank consumer lenders must adhere to a comprehensive array of federal consumer laws and state regulations. CFPB rulemaking should be based on the full array of facts in the marketplace, and certainly not based on an incomplete narrative.”