Lenders can no longer "rent-a-bank" and import high interest rates
Legislation closing a loophole that allowed lenders to evade Washington's interest rate caps on small-dollar loans has been signed into law.
The new law, sponsored in the Senate by Sen. Derek Stanford of Bothell, explicitly prohibits lenders from partnering with out-of-state banks as a way to import higher interest rates.
While Washington caps the rate on small-dollar loans, some states do not. Some lenders were then partnering with banks from other states to offer loans, thus allowing rates in the triple digits.
“Our state’s Consumer Loan Act does a good job of protecting consumers and laying out clear standards for lenders and borrowers,” said Stanford. “But some companies are partnering with out-of-state banks and using structures that allow them to slip through a loophole and charge higher interest rates. This bill makes sure regulators can stop that and protect consumers in Washington from these predatory lenders.”
