Chicago-based lender is locked in by state cap on interest rates

For many people, the most important thing the Illinois Legislature did last year was pass the Predatory Loan Prevention Act. Gov. JB Pritzker signed the measure last March, and consumer advocates hailed it as one of the toughest state laws on interest charged for consumer loans.

The Woodstock Institute said the law has already saved Illinois borrowers $200 million.

It set the maximum rate at 36%, the same as limits in other states. Illinois law goes further than some. It includes a “no evasion” section to prevent high-cost lenders from circumventing the rate cap.

Outside of Illinois, some circumvent the cap by routing loans through a federally chartered or out-of-state bank that can request an exemption from the rules. Consumer groups call it a “rent-a-bank” program.

Illinois law has bankrupted those who negotiated auto and personal loans, payday advances and other forms of financing with interest rates well into the triple digits, often 400% and more. This caused big problems for Chicago-based Opportunity Financial, which does business as OppFi.

The company, which went public last year, found itself unable to find customers near it as long as its rates remained above the limit. It had been operating here since 2012. Disclosures from OppFi show that its typical loans, ranging from $500 to $4,000, carry annual percentage rates of up to 160%.

Across the country, OppFi is among the most vigorous users of the Bank Lease strategy. Its website reports that it does business this way in 31 states, including Indiana, in addition to making loans directly in four others, including Wisconsin.

But the company, whose shares have fallen sharply in recent months, obviously wants the Illinois business. Accountable.US, a nonpartisan research and monitoring group, researched OppFi and found evidence of possible lobbying that it said could violate state law.

Shanelle Jackson, government relations manager at OppFi, posted on Facebook about contacts with Illinois lawmakers, such as a “phenomenal dinner” last November with House Speaker Emanuel “Chris” Welch, followed by another a month later. State records show Jackson first registered as a lobbyist on Jan. 26. His messages do not indicate the topics broadcast during the meetings. Jackson is also a candidate for Congress from the Detroit area.

State Sen. Jacqueline Collins, D-Chicago, was a key sponsor of Illinois’ interest rate cap and believes OppFi is looking for loopholes. In November, OppFi settled charges against it in the District of Columbia and agreed to reimburse customers $1.5 million. The attorney general accused OppFi of violating the state’s 24% rate cap and engaging in deception. He described the 160% loans as “abusive”. The company has not admitted any wrongdoing.

State Senator Jacqueline Collins, D-Chicago
Pat Nabong/Sun-Times File

A spokeswoman for Welch had no immediate comment on contact with OppFi. Collins said the Speaker of the House strongly supported limits on so-called subprime lenders that disproportionately victimize black and Latino borrowers. She also said the cause has the strong support of Senate Speaker Don Harmon, D-Oak Park. “I’m trying to get the guardrails up here,” Collins said.

When asked if OppFi had a chance of weakening the state law, which was passed with bipartisan support, Collins said, “In this matter, I would put nothing beyond the forces with the money. This is not a disparagement for my colleagues, but it is an election year, and some may need campaign money.

In late December, James Clayborne Jr., a former Illinois Senate majority leader, filed documents to show that Opportunity Financial had retained him as a lobbyist. Clayborne did not respond to requests for comment.

OppFi did not answer questions for the company or for Jackson, instead providing a statement about its business practices. It said, “OppFi provides outsourced services to state-regulated and FDIC-insured banks to help them provide affordable loans to millions of ordinary consumers who lack access to traditional credit products.

“Banks using OppFi’s platform have a core competency in community banking, and by working with companies like ours, these banks are able to play a role in expanding access. credit to people in need who would otherwise be locked out of the system and forced to work with problematic payday lenders or other providers The rates offered by banks through the OppFi platform are in line with the underwriting criteria of the Bank.

In an interview with IPO Edge last March, Jared Kaplan, then CEO of OppFi, now a board member, said, “Our mission is to help everyday consumers access simple and transparent, rebuild their financial situation and get back into the ecosystem. traditional credit.

Consumer groups say there is nothing transparent about OppFi’s banking partnerships that circumvent price caps. OppFi reports using three small banks, all licensed in Utah. Lauren Saunders, associate director of the National Consumer Law Center, said the big banks are staying away from this activity. Why is it even legal? “The FDIC fell asleep at the switch,” she said.