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Oregon committee hears rent‑a‑bank concerns and considers opt‑out to enforce 36% cap
Summary
State regulators and advocates told a House committee that out‑of‑state bank partnerships let high‑cost lenders evade Oregon’s 36% APR cap, citing roughly 22,000 noncompliant loans since 2020 and a recent consent order; presenters urged the Legislature to opt out of a federal preemption mechanism to restore state control.
Chair Sosa convened an informational hearing of the House Interim Committee on Commerce and Consumer Protection on Jan. 14, where state regulators and consumer advocates laid out how "rent‑a‑bank" arrangements enable high‑cost lenders to evade Oregon’s 36% APR cap and urged state action.
Kirsten Anderson, deputy administrator for the Division of Financial Regulation, told the committee the cap was adopted in 2007 to protect borrowers and that the Division has documented widespread evasion: "As part of our examinations, we have found, since 2020, evidence of nearly 22,000 loans that exceed the interest rate cap," she said, and described a case in which a consent order required the company to pay $900,000 in restitution to harmed Oregon consumers.
Jesse O'Brien, policy manager at the Division of Financial Regulation, described a common business model: a licensed fintech markets the loan, an out‑of‑state, state‑chartered bank places its name on the documents, and the loan is then sold or assigned back to the fintech for servicing. O'Brien said one policy tool is for Oregon to exercise its opt‑out under the federal Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA), which would make it clearer that the 36% cap applies to loans where either the lender or borrower is in Oregon. "If we were to opt out, the effect would be to ensure that the 36% interest rate cap applies to out‑of‑state state‑chartered banks partnering fintech licensees," he said, and cited a recent 10th Circuit ruling favoring a state‑level opt‑out as an important legal development.
Consumer advocate Angela Donnelly (Oregon Consumer Justice) walked the committee through the borrower experience and gave numerical examples the committee could use for comparison. Using a lender‑bank pairing she said the committee had reviewed, Donnelly said a typical $1,700 loan priced at about 159% APR resulted in roughly $2,703 in interest and a total repayment of about $4,403. "So that consumer in the end will pay $4,403," she said, and contrasted that with a 36% loan where interest would be about $580 and total repayment about $2,285.
Speakers emphasized that only a small group of lenders and banks appear to exploit this structure in Oregon, but that the harm is measurable and often invisible to borrowers who do not realize an out‑of‑state bank is on the paperwork. Committee members pressed whether stakeholders had been convened; Chair Sosa said there had been no work group since the bill passed the House last session but did not make it out of the Senate and indicated the concept will return to the Legislature in February as a personal bill.
Next steps: the presentation laid groundwork for statutory options, including an opt‑out under DIDMCA and potential legislation to clarify the application of Oregon’s 36% APR cap to loans involving out‑of‑state chartered banks.
