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Comment on Proposed Interagency Guidance on Third-Party Relationships: Risk Management

October 18, 2021
Payday and Other Small Dollar Loans
Payday Loans
Comment Letter

The Center for Responsible Lending (CRL), the Consumer Federation of America (CFA), the National Consumer Law Center (NCLC) (on behalf of its low-income clients), and the National Fair Housing Alliance (NFHA) submitted a comment on the Proposed Interagency Guidance on Third-Party Relationships with an emphasis the following points:

  • A handful of FDIC-supervised banks are engaged in high-cost rent-a-bank schemes, which the FDIC should immediately prohibit. This proposed guidance, by its silence, could encourage more schemes.
  • Other OCC- and FDIC-supervised banks are enabling high-cost credit features on non-bank deposit accounts that potentially involve violations or evasion of state lending laws or the CFPB’s prepaid accounts rule.
  • The guidance should explicitly provide that banks should not engage in partnerships that enable non-banks to claim they are not subject to state licensing or consumer protection laws;
  • At a minimum, the guidance should explicitly:
    • deem bank involvement in lending that exceeds state interest rate limits that apply to non-banks a “critical activity”;
    • declare that loans exceeding a fee-inclusive 36% APR pose especially high risks;
    • provide that when loans exceed MLA 36% APR, the federal banking supervisor will directly examine the third-party partner and charge the bank for the cost of those examinations.
  • Guidance addressing information security should be generally applicable not only to data aggregators but to all companies with which a bank shares data, including consumer reporting agencies (CRAs) and other data gathering entities (e.g., data brokers such as Acxiom).