The Federal Deposit Insurance Corporation (FDIC) has recently announced a significant downgrade in the Community Reinvestment Act (CRA) performance rating for Transportation Alliance Bank (TAB Bank). This action, made public late last week, marks a serious reprimand for the Utah-based institution, lowering its rating to “needs to improve.” Such a low rating is uncommon for banks and signals significant concerns from regulators.
This downgrade comes as a direct result of the FDIC’s findings that TAB Bank engaged in unfair or deceptive acts or practices. These practices were deemed to have negatively impacted a considerable number of consumers over a prolonged period. The FDIC’s scrutiny and subsequent action underscore the agency’s commitment to protecting consumers from harmful financial practices and ensuring banks operate responsibly within the communities they serve.
Consumer advocacy groups had previously voiced strong concerns to the FDIC regarding TAB Bank’s lending activities. They argued that the bank was offering predatory credit products that did not align with the convenience and needs of communities, as mandated by the CRA. These groups presented compelling evidence detailing TAB Bank’s involvement in facilitating what they termed “predatory puppy loans,” “predatory auto repair loans,” and loans targeting servicemembers and veterans.
A key point of contention was TAB Bank’s partnership with EasyPay Finance. Through this “rent-a-bank” arrangement, TAB Bank enabled EasyPay to issue loans with exorbitant annual percentage rates (APRs) reaching up to 189%. This practice allowed EasyPay to circumvent state interest rate caps designed to protect consumers from predatory lending, as these rates would be illegal for non-bank lenders in many states. The structure of these loans has drawn numerous complaints from borrowers, citing issues such as payments primarily covering interest, misleading “interest-free” promotions, aggressive debt collection tactics, and inaccuracies in credit reporting.
The publicly available portion of TAB Bank’s FDIC evaluation specifically points to a violation of the Federal Trade Commission Act’s prohibition against unfair or deceptive acts or practices (UDAP). This citation further emphasizes the severity of the regulatory findings against Transportation Alliance Bank.
Transportation Alliance Bank is among a group of “rogue banks” identified by consumer advocates for allegedly laundering triple-digit interest rate loans originated by non-bank lenders. These groups have been actively urging the FDIC to take decisive action to prevent banks from being used to circumvent state usury laws and facilitate predatory lending schemes.
Consumer advocates have responded strongly to the FDIC’s downgrade of Transportation Alliance Bank. Lauren Saunders, associate director at the National Consumer Law Center, stated, “TAB Bank has been disserving the community through its predatory rent-a-bank loans and deserves this downgrade. No bank should help predatory lenders evade state interest rate laws and make destructive loans that put people in a debt trap.”
Rachel Gittleman, financial services outreach manager for the Consumer Federation of America, echoed these sentiments, noting, “TAB Bank has a record of enabling harmful rent-a-bank loans for auto repairs, pet purchases, and other retail purchases. This downgrade is an important first step, but we encourage the FDIC to stop TAB bank and others from peddling predatory loans into the communities that they are supposed to serve.”
Adam Rust, senior policy advisor for the National Community Reinvestment Coalition, emphasized the core purpose of the CRA, stating, “The CRA calls on banks to meet the convenience and needs of the communities where they do business. That starts with not using a bank charter to facilitate harmful and deceptive lending practices. We commend the FDIC for taking this step to hold TAB accountable.”
Nadine Chabrier, senior policy counsel at the Center for Responsible Lending, highlighted the broader implications of the FDIC’s action: “In lowering TAB Bank’s CRA score, the FDIC sent the message that banks engaged in predatory lending practices will face negative consequences. We urge the FDIC to take additional steps to stop all banks it regulates from harming consumers through rent-a-bank schemes.”
The Community Reinvestment Act (CRA), enacted in 1977, is designed to ensure that insured banks and thrifts meet the credit needs of the local communities in which they operate, including low- and moderate-income neighborhoods. The recent action against Transportation Alliance Bank underscores the FDIC’s renewed focus on enforcing the CRA and preventing banks from enabling predatory lending practices that harm consumers and communities. This downgrade serves as a clear signal to the financial industry that regulatory bodies are actively monitoring and addressing practices that undermine consumer protection and community reinvestment principles.
