<\/p>\n
While many Americans have an account at a traditional bank, there are some who, for various reasons, can\u2019t get an account.<\/p>\n
Roughly 18% of Americans are unbanked, meaning they don\u2019t have a bank account or don\u2019t fully participate in the banking system, according to the Federal Reserve Bank of Cleveland.<\/p>\n
This might be because they\u2019ve been flagged in a bank\u2019s system, are not in an area served by traditional banks, or have opted out of the banking system for personal reasons.<\/p>\n
Fintech firms and online banks have tried to fill this role by making it easier for Americans who can\u2019t get an account or who struggle to get approved for a loan by a traditional bank.<\/p>\n
Operating on the fringes of regulated banks, one of these fintech lenders is about to go into banking. But some have raised alarm bells.<\/p>\n
OppFi is buying a bank<\/p>\n
Bank consolidation has been on the rise recently due to a favorable regulatory environment, TheStreet reported. Under U.S. President Donald Trump, approval time for deals has fallen from 17 months to three to four months on average, experts told TheStreet.<\/p>\n
Amid this climate, fintech lender OppFi has shared that it plans to buy Arizona-based bank BNC National Bank in a $130 million stock-and-cash deal, which will allow it to offer banking services, including checking and savings accounts, on a national scale.<\/p>\n
More bank news<\/p>\n
Bank of America goes all in on controversial techPNC has great news for customers150-year-old bank announces branch closures<\/p>\n
The combined deal will merge OppFi\u2019s online lending platform with BNC\u2019s national bank charter. \u00a0At the moment, OppFi partners with FinWise Bank, First Electronic Bank, and Capital Community Bank to offer its loan services.<\/p>\n
“The transformative combination of OppFi’s digital-first platform and BNC’s national bank charter unlocks significant opportunities for growth and product diversification,” OppFi CEO Todd Schwartz said in a statement.<\/p>\n
Dan Collins, BNCC President and CEO said the deal would increase the capital the bank holds and provide better services for its customers.<\/p>\n
“With greater financial flexibility and enhanced digital capabilities, we will be well-positioned to elevate the customer experience and better serve our customers as their needs continue to evolve,” he stated.<\/p>\n
OppFi’s purchase of a bank will allow it to offer more bank account options for customers. <\/p>\n
AFP via Getty Images<\/p>\n
Controversy surrounding OppFi \u00a0<\/p>\n
Fintech lenders aren\u2019t always seen in the same light as regulated banks. While it\u2019s often easier to borrow from such lenders, one study from the Harvard School of Business found that consumers who borrow from fintechs are more likely to sink into debt and spend beyond their means.<\/p>\n
Meanwhile, a survey from the Federal Reserve Bank of Cleveland found that those who are unbanked don\u2019t always find that alternative financial services like fintech firms are an adequate substitute.<\/p>\n
So it\u2019s no wonder that some have urged caution about OppFi\u2019s expected takeover of a chartered bank.<\/p>\n
This isn\u2019t the first time OppFi has been scrutinized.<\/p>\n
OppFi\u2019s past regulatory issuesIn 2021, OppFi agreed to refund Washington, D.C., residents $1.5 million in a settlement with the city over its interest rates, according to The Washington Post.OppFi has also been investigated by the Consumer Financial Protection Bureau on whether its practices violate the Military Lending Act, which caps the interest rate made to military borrowers at 36%. The CFPB decided not to take an enforcement action against OppFi, regulatory filings show.OppFi has also been battling California regulators over claims that it uses a \u201crent-a-bank\u201d partnership with FinWise to circumvent the state\u2019s interest rate limits. According to the ABA Banking Journal, a California state judge preliminarily ruled in early April that state regulators could not classify the partnership as illegal. \u00a0<\/p>\n
OppFi has also been criticised for circumventing states\u2019 usury laws to offer loans with interest rates that exceed state limits.<\/p>\n
Concern about nonbank lending practices<\/p>\n
The National Consumer Law Center is the latest to ring the alarm bells regarding OppFi.<\/p>\n
The nonprofit says the lender charges interest as high as 160% or more and that the BNC National Bank deal would allow OppFi to ignore interest rate limits in 45 states.<\/p>\n
\u201cOppFi\u2019s 160% interest charges are outrageous. President Trump should not allow OppFi to become a national bank and spread high interest rate pain across the country,\u201d\u00a0said Lauren Saunders, senior attorney at the National Consumer Law Center.\u00a0\u00a0<\/p>\n
While most states have an interest rate limit on nonbank lenders like OppFi, federal law allows national banks to only charge the rate allowed in the state where the bank is headquartered. This practice allows nonbank lenders like OppFi to circumvent state usury laws that cap interest rate ceilings, according to one study from the Federal Reserve. \u00a0<\/p>\n
While OppFi is currently headquartered in Chicago, where there are lending cap rules, BNC National Bank is located in Arizona, a state that does not cap interest rates.<\/p>\n
Related: This major bank is going on a branch-opening spree<\/p>\n
#Alarm #bells #raised #fintech #firms #bank #purchase<\/p>\n","protected":false},"excerpt":{"rendered":"
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