Watch out for TAB Bank and other banks that allow non-bank lenders to launder high-cost loans through them

How do you pick out a bank? It’s more difficult than it seems. Many people choose a branch near them. But, banks can have practices that are detrimental to consumers who want to spend money wisely.

The Federal Deposit Insurance Corporation or FDIC has downgraded Transportation Alliance Bank or TAB Bank to “needs to improve,” a low rating that few banks get. The FDIC found that the bank committed unfair or deceptive practices that “impacted a large number of consumers over an extended period of time.”

Through a “rent-a-bank” partnership with EasyPay Finance, the bank helped EasyPay make loans up to 189 percent APR in states where that rate is illegal for non-bank lenders. Hundreds of consumers have filed complaints about these loans, describing payments that mostly go to interest, deceptive interest-free promotions, debt collector harassment, and credit reporting problems, according to the Consumer Federation of America or CFA.

TAB Bank is one of six rogue banks that consumer groups have urged the FDIC to stop from laundering triple-digit interest rate loans that are issued by nonbank lenders to evade state interest rate laws.

TAB Bank and three of other problems banks are chartered in Utah: FinWise Bank, Capital Community Bank, and First Electronic Bank; the other two banks are Republic Bank & Trust of Kentucky and Lead Bank of Missouri, more than 12 consumer groups said in a letter to the FDIC. The high-cost lenders using banks to launder their loans include EasyPay Finance, Elevate Credit, OppLoans, the installment loan brand of the payday lender CashNetUSA, and the auto title lender LoanMart, among others.

“TAB Bank has a record of enabling harmful rent-a-bank loans for auto repairs, pet purchases, and other retail purchases,” said Rachel Gittleman, financial services outreach manager for the CFA. “This downgrade is an important first step, but we encourage the FDIC to stop TAB bank and others from peddling predatory loans into the communities that they are supposed to serve.”

So, avoid these high-cost lenders and banks. They’re ripping off consumers in a bank loophole that needs to be closed by regulators.