Santa isn’t the only one keeping a list and checking it twice this year–to recognize both good and bad actions in the area of financial services in 2021, we’re releasing our first annual “Naughty & Nice List.”

Who’s Naughty

On the Naughty List are OppFi, a Chicago-based predatory lender, and the Illinois Pawnbroker Association. OppFi has made headlines this year for all the wrong reasons. On November 30, the Attorney General for the District of Columbia announced a $2 million settlement with the company, under which OppFi will refund over 4,000 DC residents $1.5 million for charging 160% APR  – more than seven times the DC’s 24% rate cap. OppFi stopped making loans in Illinois for now after the State enacted a 36% rate cap earlier this year, but they support attempts to change the law to re-open the door to their high-interest products. 

OppFi is notorious for evading state rate caps by scheming with banks based in Utah, which doesn’t have rate caps. (The typical rate for a payday loan in Utah is 652% APR.) OppFi states their loans are “originated and funded” by the Utah bank. In this way, OppFi uses the Utah bank as a shield from other states’ rate caps. Of the 36 states in which OppFi makes loans, they use a “rent-a-bank” scheme in 32 of them and charge interest rates as high as 160% APR.

Also on the Naughty List is the Illinois Pawnbrokers Association. Pawnbrokers in Illinois typically charge 240% APR – nearly seven times as much as the state rate cap and seven times as much as they are allowed to charge in neighboring Michigan. The industry successfully persuaded a court in Sangamon County this year that the Predatory Loan Prevention Act’s 36% rate cap on loans in Illinois doesn’t apply to them, even though pawn loans fall squarely within the law’s broad definition of “loan.” Some pawnbrokers even have the word “loan” in their store name. The legal battle over the issue is ongoing.

And Who’s Nice

Topping the “Nice” list is the Consumer Financial Protection Bureau (CFPB), which has “done a 180” this year. The CFPB in the preceding few years under the prior Administration undid many hard-fought consumer protections. Perhaps most notorious was the CFPB’s decision to gut rules requiring payday lenders to determine a borrower’s ability to repay a loan before making the loan. At the time, Woodstock commented by saying the agency’s move ran “counter to reason and research” and “poses a significant threat to millions of American consumers.” 

This year, under the new director, Rohit Chopra, the agency is aggressively furthering its mission to protect consumers. A particularly significant move was the CFPB’s September proposal of rules requiring lenders to small businesses to collect and report demographic data of borrowers. Such data collection, which has been in place since 1975 for mortgage lending, is critical to enabling policymakers and researchers like Woodstock to detect patterns of discrimination.

Also on the Nice list this year are the banks that have made moves to stop or curb overdraft fees. According to the CFPB, financial institutions’ revenue from overdraft fees reached an estimated $15.47 billion in 2019. In Woodstock’s view, overdraft fees are essentially a penalty for being poor.  

“While our financial system is riddled with racial and economic inequities,” said Horacio Mendez, President & CEO of Woodstock Institute, “Woodstock’s philosophy is to point out positive actions when they occur in the hopes of inspiring more moves in the right direction.”

Topping the list in the area of improving overdraft fee practices is Capital One, which announced on December 1 that it is completely eliminating all overdraft fees and non-sufficient fund fees. Also meriting recognition for improving their overdraft practices are Chase, BMO Harris, and PNC. At both Chase and BMO Harris, overdraft fees kick in only if your account is overdrawn by more than $50, and Chase customers will be able to access direct deposit paychecks up to two days early. PNC launched a new account feature this year called “Low-Cash Mode” that gives customers more time to fund their account to avoid an overdraft situation and, for each transaction that would overdraw the account, allows customers to elect whether the bank should clear the payment or reject it.

In the interest of full transparency, Woodstock receives financial support from several banks. However, the nonprofit routinely advocates for policies that the banking industry opposes, including bills introduced by Senator Dick Durbin and Congressman Chuy Garcia to establish a 36% rate cap on loans nationwide, the Illinois Community Reinvestment Act, and the Overdraft Protection Act, among others.