Federal banking regulators should reject Enova International Inc.'s bid to buy a national bank because it would allow the online lender to issue high-cost loans in states with interest rate caps, Democratic senators said.
Enova’s $369 million deal to purchase Grasshopper Bank N.A. would let the fintech issue loans across the country with interest rates as high as 300% because Grasshopper has a national charter from the Office of the Comptroller of the Currency, Sens. Elizabeth Warren (D-Mass.) and Chris Van Hollen (D-Md.) said in a Wednesday letter to regulators shared exclusively with Bloomberg Law.
Warren is the top Democrat on the Senate Banking Committee.
Chicago-based Enova is proposing to move Grasshopper’s headquarters from New York, where the lender faces a 25% criminal usury cap, to Utah, which has no rate cap, making it easier to export high-cost loans across state lines, the senators said in their letter to incoming Federal Reserve Chair Kevin Warsh and Comptroller of the Currency Jonathan Gould.
“By acquiring Grasshopper and moving the bank’s headquarters, Enova would succeed in unlocking the benefits of the bank’s national bank charter for the purposes of expanding Enova’s predatory lending strategies to the national stage, side-stepping the interest rate caps of 45 states,” Warren and Van Hollen said.
Enova could also use the charter it gains from its proposed acquisition of Grasshopper to become a banking partner for other high-cost lenders seeking to evade state interest rate caps, the senators warned.
The proposed Enova-Grasshopper deal needs Fed and OCC approval to close under authorities granted by the Bank Holding Company Act and the Bank Merger Act, respectively. The Fed declined to comment. The OCC and Enova didn’t immediately respond to requests for comment.
Fintech Push
The Trump administration has been pushing to get more financial technology companies and other digital lenders into the federal banking system.
President Donald Trump signed an executive order this week telling banking agencies to update their regulations, supervisory practices, and charter application processes in a bid to “facilitate innovation and greater competition in the provision of financial services.”
The OCC has already granted a slew of new charters to crypto companies despite protests from banks and consumer advocates, while the Fed in March allowed Kraken to become the first digital asset bank to gain direct access to the federal payments system.
Gould has also been aggressive in asserting federal preemption of state consumer protection and interchange fee laws.
States such as Colorado have also enacted laws seeking to limit out-of-state banks from issuing loans that violate state interest rate caps, but those efforts have drawn legal challenges. Banks and fintechs are set to make their case before a full federal appeals court to toss Colorado’s law.
Checkered History
Consumer advocates have fiercely opposed Enova’s proposed deal, noting the company has faced charges that it violated federal consumer financial protection laws.
The Consumer Financial Protection Bureau fined Enova $3.2 million in 2019 during Trump’s first term, accusing it of withdrawing money from customers’ accounts without permission and improperly canceling loan extensions it had granted. The CFPB fined Enova a further $15 million in 2023 for violating terms of the first consent order.
Enova offers installment and other loans through its CashNetUSA and NetCredit subsidiaries.
In states that allow interest rates over 100%, CashNetUSA and NetCredit issue loans with rates as high as 300% through state licenses. In states that cap rates at 100%, NetCredit issues loans with 99.9% annual percentage rates, the two senators said.
Enova also has charge-off rates—imposed when a lender determines it’s unlikely to collect on a loan—upwards of 50%, significantly higher than most banks and an indication of unsafe lending practices, Warren and Van Hollen said.
Enova currently operates in 37 states and in Brazil, issuing $7.8 billion in consumer and business loans last year, according to securities filings. The company has licenses to operate in each of those states and uses partner banks to issue the loans.
Banking regulators are also weighing a bid from nonbank digital lender OppFi Inc. last month to buy BNCCORP Inc. and its BNC National Bank subsidiary for $130 million.