After win, consumer advocates target another Utah bank over expensive loans

One month after regulators dinged a Utah bank that had ties to a high-cost lender, consumer advocacy groups have another bank from the Beehive State in their crosshairs.

The bank now facing scrutiny is FinWise Bank in Murray, Utah, which partners with nonbanks to offer high-cost consumer loans.

Various consumer advocacy groups, including the National Consumer Law Center and the Center for Responsible Lending, urged the Federal Deposit Insurance Corp. this week to downgrade FinWise on its Community Reinvestment Act examination.

"The loans that FinWise facilitates are not only usurious; they also pose a host of other consumer protection problems and potential legal violations," the groups wrote in a letter to the FDIC.

FinWise Bank, a subsidiary of the $402 million-asset FinWise Bancorp, did not respond to a request for comment Wednesday.

Lauren Saunders, associate director at the National Consumer Law Center, said in an interview that FinWise enables its partners to evade state interest rate caps, from which banks are exempt. She also pointed to what she described as a high number of complaints that customers have filed in connection with loans facilitated by FinWise.

A downgrade on a Community Reinvestment Act exam affects whether a bank can enter into mergers, Saunders noted. "And it's a stain on its reputation," she added.

One of FinWise Bank's partners, the consumer lender OppFi, has been locked in a battle with California regulators over whether a state interest-rate cap applies to its business. 

OppFi sued the California Department of Financial Protection and Innovation last year, arguing that its loans shouldn't be subject to the state's rate cap. The state agency countersued, and last month it asked a judge to issue a preliminary injunction that would prevent OppFi from making loans with interest rates above 36% to California consumers.

The situation at FinWise Bank mirrors recent circumstances at Ogden, Utah-based Transportation Alliance Bank, known as TAB Bank. 

Last year, consumer advocacy groups asked the FDIC to lower the Community Reinvestment Act rating of TAB Bank, pointing to the bank's partnership with a nonbank lender to offer high-cost consumer loans. In February, the FDIC lowered TAB's rating from "satisfactory" to "needs to improve."