Rent-a-Bank Schemes

Would-be loan providers have traditionally attempted to evade state usury regulations utilizing alleged rent-a-bank schemes: An out-of-state bank, which need not adhere to rate of interest caps into the payday lender’s state, will act as a front side when it comes to business that is actually behind a high-interest loan so it couldn’t legally make it self. In return for “renting” itself down in this way—expending effort that is little taking small risk within the process—the bank gets a little cut regarding the action.

Such schemes had been typical about 20 years back but had been mostly controlled away during the early 2000s. (more…)