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).

Jeremy regularly interacts with regulators on behalf of industry trade groups. He has drafted a number of amicus curiae briefs to the U.S. Supreme Court and other courts on behalf of a number of industry and business trade groups, including the American Bankers Association, the Consumer Bankers Association, the U.S. Chamber of Commerce, the Mortgage Bankers Association, the Financial Services Roundtable, and the American Financial Services Association.

In addition, Jeremy represents banks, thrifts, and other entities in regulatory diligence matters, charter transactions; mergers, acquisitions, and conversions; asset securitizations; purchases of loan servicing rights; and public offerings and private placements of equity and debt instruments.

Photo of James Stevens James Stevens

James Stevens provides general corporate and regulatory advice to our clients. James has substantial experience in the representation of public and private companies, including financial institutions, marketplace lenders and other FinTech and financial services companies, in mergers and acquisitions, securities offerings and regulatory…

James Stevens provides general corporate and regulatory advice to our clients. James has substantial experience in the representation of public and private companies, including financial institutions, marketplace lenders and other FinTech and financial services companies, in mergers and acquisitions, securities offerings and regulatory reporting and compliance. He often serves as the principal outside counsel for these clients.

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.

Chris also leverages insights from his litigation and enforcement experience to help clients design new products and processes, including machine learning marketing, fraud prevention and underwriting models, product structure, advertising, online application flows, underwriting, and collection and loss mitigation strategies.

Chris brings a highly practical focus to his legal advice, informed by balancing a deep understanding of the business of consumer finance and the practical priorities of federal and state regulatory agencies.

Chris speaks frequently at conferences across the country on consumer financial services law and has been featured in numerous articles in publications such as the Wall Street Journal, the New York Times, the Washington PostAmerican BankerNational Law JournalBNA Bloomberg, and Bank Safety and Soundness Advisor.

Photo of Stephen C. Piepgrass Stephen C. Piepgrass

Stephen specializes in state Attorneys General investigations and other government entities, as well as litigation.

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

Ashley specializes in regulatory and enforcement matters involving the state Attorneys General, CFPB and FTC.

Photo of Stefanie Jackman Stefanie Jackman

Stefanie devotes her practice to assisting financial services institutions facing state and federal government investigations and examinations, counseling them on complex compliance issues, as well as defending them in individual and class action lawsuits. Stefanie represents clients across the financial services industry, including…

Stefanie devotes her practice to assisting financial services institutions facing state and federal government investigations and examinations, counseling them on complex compliance issues, as well as defending them in individual and class action lawsuits. Stefanie represents clients across the financial services industry, including banks and nonbanks, mortgage banking lenders and servicers, debt collectors and buyers, third-party service providers, health care and medical revenue cycle service providers, credit and prepaid card companies, auto lenders, and fintechs. She regularly advises her clients on issues arising under an array of federal and state consumer financial laws, including UDAP/UDAAP statutes, the FDCPA, FCRA, TCPA, EFTA, SCRA, and TILA.

In addition to her litigation and government investigations work, Stefanie focuses a significant portion of her practice on providing compliance-related advice to her clients. She regularly counsels clients on conducting compliance assessments relating to their debt collection, credit reporting and dispute resolution processes, fair lending and underwriting, and vendor oversight, as well as the functionality of their overall compliance management system. Stefanie also brings her litigation and enforcement experience to bear in assisting clients in designing new products and processes, including product structuring, advertising, online application flows, underwriting, and servicing-related strategies.