In a keynote address at the Consumer Federation of America’s 2022 Consumer Assembly, CFPB Deputy Director Zixta Martinez squarely took aim at “rent-a-bank schemes” in some of the first (if not the first) such comments by a senior CFPB official. Historically, the CFPB has confined itself to “true lender” litigation against participants in high-rate programs involving Native American tribal parties (and not banks) already challenged by state enforcement authorities. We view Deputy Director Martinez’s comments as potentially signaling more widespread pursuit of this theory by the CFPB.

In her remarks, Ms. Martinez referenced a rise in installment loans and lines of credit with lenders that supposedly “attempt to use [relationships with banks] to evade state interest rate caps and licensing laws by making claims that the bank, rather than the non-bank, is the lender.” Notably, Ms. Martinez seems to have accepted the premise that the nonbank participant in these programs is the “true lender.”

Additionally, Ms. Martinez went on to criticize “unusually high default rates” on these loans, “which raise questions about whether their products set borrowers up for failure.” This comment echoes the philosophy of the “mandatory underwriting provisions” of the CFPB Rule on Payday, Vehicle Title, and Certain High-Rate Installment Loans (provisions revoked by the Trump-era CFPB) and UDAAP claims the CFPB previously asserted in cases involving ITT and Corinthian Colleges, which state attorneys general began making shortly after the subprime mortgage crisis.

Finally, Ms. Martinez added, without specification of the nature or frequency of the complaints, that the CFPB’s database reveals “a range of other significant consumer protection concerns with certain loans associated with bank partnerships.” She promised the CFA that “we are taking a close look” at these partnerships.

We take Deputy Director Martinez’ speech to the CFA as an important indicator of CFPB priorities, and in particular, the shift in emphasis on criticizing “rent-a-bank” arrangements. These comments may suggest that the CFPB is poised to follow in the footsteps of state attorneys general and state financial services regulators in asserting “true lender” claims against the nonbank parties in these relationships.

We will continue to closely monitor these developments and their implications for those in the consumer financial services space, including lenders, servicers, and banks.

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Photo of Jeremy Rosenblum Jeremy Rosenblum

Jeremy focuses his practice on federal and state lending and consumer practices laws, with emphasis on the interplay between federal and state laws, joint ventures between banks and nonbank financial services providers, the development and documentation of new financial services products (especially products…

Jeremy focuses his practice on federal and state lending and consumer practices laws, with emphasis on the interplay between federal and state laws, joint ventures between banks and nonbank financial services providers, the development and documentation of new financial services products (especially products designed to serve the needs of unbanked and under-banked consumers), bank overdraft practices and disclosures, geographic expansion initiatives, and compliance with federal and state consumer protection laws, including statutes prohibiting unfair, deceptive and abusive acts and practices (UDAAP); usury laws; the Truth in Lending Act (TILA); the Electronic Funds Transfer Act; E-SIGN; the Equal Credit Opportunity Act; and the Fair Credit Reporting Act (FCRA).

Photo of James Stevens James Stevens

James provides corporate and regulatory advice to our clients. He has substantial experience in the representation of public and private companies, including banks, neobanks, marketplace lenders, payments companies, crypto and DeFi companies, and other fintech and financial services providers in connection with formation…

James provides corporate and regulatory advice to our clients. He has substantial experience in the representation of public and private companies, including banks, neobanks, marketplace lenders, payments companies, crypto and DeFi companies, and other fintech and financial services providers in connection with formation, licensing, sponsorship and program agreements, mergers and acquisitions, debt and equity financing transactions, joint ventures, and regulatory reporting and compliance.

Photo of Chris Willis Chris Willis

Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending…

Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending them in individual and class action lawsuits brought by consumers and enforcement actions brought by government agencies.

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Stephen represents clients interacting with, and being investigated by, state attorneys general and other enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, particularly in heavily regulated industries.

Photo of Ashley L. Taylor, Jr. Ashley L. Taylor, Jr.

Ashley is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, and focuses primarily on federal and state government regulatory and enforcement matters involving state attorneys general, the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC).

Ashley is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, and focuses primarily on federal and state government regulatory and enforcement matters involving state attorneys general, the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC). He serves as a member of the firm’s Policy and Partner Compensation committees.

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Stefanie takes a holistic approach to working with clients both through compliance counseling and assessment relating to consumer products and services, as well as serving as a zealous advocate in government inquiries, investigations, and consumer litigation.