PRESS RELEASE
Federal Deposit Insurance Corporation
FOR IMMEDIATE RELEASE
June 14, 2000
Media Contact:
David Barr (202) 898-6992
Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's
banking system. It promotes the safety and soundness of these institutions by identifying, monitoring and addressing
risks to which they are exposed. The FDIC receives no federal tax dollars — insured financial institutions fund its
operations.
FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically
(go to www.fdic.gov/about/subscriptions/index.html) and may also be obtained through the FDIC's Public Information
Center (877-275-3342 or 703-562-2200). PR-41-2000
FDIC CHAIRMAN TANOUE DENOUNCES "CHARTER RENTING" AS A
MEANS OF FUNDING PREDATORY PAYDAY LENDERS
Federal Deposit Insurance Corporation Chairman Donna Tanoue spoke out against
banks renting out their charters to nonbank payday lenders to facilitate high-cost
lending.
"The practice of renting a charter merely to collect a fee to allow a high-cost payday
lender to circumvent state law is inappropriate," she told attendees last night at the
Seventh Annual Greenlining Economic Development Summit in Sacramento. "It may be
legal-but I don't like it."
So-called "charter renting" occurs when a bank allows nonbank lenders in other states
to use the bank's authority to circumvent state caps on interest rates in exchange for a
fee. The payday lender uses the bank to initially fund its loans, and then immediately
buys back substantially all of the loan amounts right after funding. The payday lender
then services the loans and collects the payments.
Short-term, small-dollar loans can provide a valuable service to those who need to
bridge gaps in their finances. But Chairman Tanoue points out that many lenders
charge excessive fees for these loans. Payday lenders typically charge $15 to $20 for
each $100 advanced over a two-week period, which amounts to an annual percentage
rate in excess of 400 percent.
Chairman Tanoue has instructed her staff to review the practice of charter renting to
determine what, if anything, can be done at a regulatory level. She also urged
lawmakers and bank trade associations to develop an approach to constrain this
"unbecoming practice."
Attachment: FDIC Chairman Tanoue speaks before the Seventh Annual Greenlining
Economic Development Summit
Federal Deposit Insurance Corporation
FOR IMMEDIATE RELEASE
June 14, 2000
Media Contact:
David Barr (202) 898-6992
Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's
banking system. It promotes the safety and soundness of these institutions by identifying, monitoring and addressing
risks to which they are exposed. The FDIC receives no federal tax dollars — insured financial institutions fund its
operations.
FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically
(go to www.fdic.gov/about/subscriptions/index.html) and may also be obtained through the FDIC's Public Information
Center (877-275-3342 or 703-562-2200). PR-41-2000
FDIC CHAIRMAN TANOUE DENOUNCES "CHARTER RENTING" AS A
MEANS OF FUNDING PREDATORY PAYDAY LENDERS
Federal Deposit Insurance Corporation Chairman Donna Tanoue spoke out against
banks renting out their charters to nonbank payday lenders to facilitate high-cost
lending.
"The practice of renting a charter merely to collect a fee to allow a high-cost payday
lender to circumvent state law is inappropriate," she told attendees last night at the
Seventh Annual Greenlining Economic Development Summit in Sacramento. "It may be
legal-but I don't like it."
So-called "charter renting" occurs when a bank allows nonbank lenders in other states
to use the bank's authority to circumvent state caps on interest rates in exchange for a
fee. The payday lender uses the bank to initially fund its loans, and then immediately
buys back substantially all of the loan amounts right after funding. The payday lender
then services the loans and collects the payments.
Short-term, small-dollar loans can provide a valuable service to those who need to
bridge gaps in their finances. But Chairman Tanoue points out that many lenders
charge excessive fees for these loans. Payday lenders typically charge $15 to $20 for
each $100 advanced over a two-week period, which amounts to an annual percentage
rate in excess of 400 percent.
Chairman Tanoue has instructed her staff to review the practice of charter renting to
determine what, if anything, can be done at a regulatory level. She also urged
lawmakers and bank trade associations to develop an approach to constrain this
"unbecoming practice."
Attachment: FDIC Chairman Tanoue speaks before the Seventh Annual Greenlining
Economic Development Summit