The American Fintech Council (AFC) has reached out to the Washington Department of Financial Institutions (DFI) in response to the state's Predatory Loan Prevention Act (PLPA). The AFC, a major industry association representing responsible fintech firms and innovative banks, stressed the need for amendments to the current regulations to help restore access to credit for underserved communities.
In its submission, the AFC expressed support for consumer protection against predatory lending. Still, it highlighted the negative impact the PLPA has had on lending within Washington, especially on low- and moderate-income communities. According to the AFC, restrictive interest rate caps and legal uncertainties regarding bank-fintech partnerships have curtailed tens of thousands of loans.
"Washington’s goals of eradicating payday lending and protecting consumers are laudable, but the current implementation of the PLPA has unintentionally limited access to affordable credit for the very communities the law seeks to protect," said Phil Goldfeder, CEO of AFC. Goldfeder also emphasized the need for balanced reforms that restore credit access and resolve legal uncertainties.
The AFC's letter identified three main concerns. Firstly, the 25% interest cap hinders responsible bank-fintech partnerships, even if their products fall below the 36% threshold commonly viewed as guarding against predatory lending. Secondly, the organization's concern revolves around Washington’s "true lender" tests, which include unclear definitions that conflict with federal preemption standards. Lastly, AFC pointed out the necessity for clarity in the licensing guidance, urging the DFI to refine its interpretation of key tests.
Ian P. Moloney, SVP and Head of Policy and Regulatory Affairs at AFC, remarked on the need for clarity, noting: “The lack of regulatory clarity in the current law exposes the state to legal challenges and creates confusion for responsible industry participants trying to comply in good faith."
The AFC recommends that further guidance be issued by the Department, which aligns with federal banking laws and legal precedents, ensuring viable bank-fintech partnerships. Clear enforcement standards and thresholds are also suggested, especially for the predominant economic interest test, to benefit Washington borrowers.
As the primary trade association for leading financial technology companies and innovative banks, the AFC advocates for a transparent and inclusive financial system. Its members aim to enhance competition in consumer finance and develop products tailored to underserved segments.