Trump fintech order sparks warnings over predatory lending, consumer protections
Critics warn easier access for fintech and crypto firms to the banking system could expose consumers to fraud, risky accounts and weaker oversight
The National Consumer Law Center is warning that a sweeping new Trump administration executive order aimed at promoting financial technology innovation could expose consumers to higher-cost loans, weaker safeguards and greater financial risk.
The order, signed this week by President Donald Trump, directs federal financial regulators to review and potentially loosen rules governing fintech companies, bank partnerships and access to the nation’s payments infrastructure.
Consumer advocates say the move could accelerate so-called “rent-a-bank” arrangements in which nonbank lenders partner with federally chartered banks to bypass state interest-rate caps and offer triple-digit-interest loans nationwide.
“This order is an assault on consumers and on federal and state laws that protect people from high-cost loans and other risky products,” Lauren Saunders, senior attorney at NCLC, said in a statement.
According to NCLC, the administration is simultaneously considering national bank charter applications from lenders including Enova and OppFi, companies critics say have offered loans with annual percentage rates ranging from 100% to 300%. (NCLC)
“Modernization effort”
The White House defended the order as a modernization effort designed to make financial services cheaper and more accessible.
In a fact sheet accompanying the order, the administration said current rules “favor incumbents at the expense of innovators” and argued that fintech firms can provide “low-cost and efficient access to financial markets.”
The administration also said the order would help integrate digital assets and modern payment technologies into the financial system while maintaining “safety and soundness.”
Fight over state rate caps
At the center of the debate is whether fintech-bank partnerships allow lenders to evade state usury laws.
Most states cap interest rates on small-dollar consumer loans, often around 36% APR. Consumer groups argue fintech lenders increasingly partner with out-of-state banks to claim federal preemption from those caps.
NCLC said the executive order could make those partnerships easier and faster to approve.
A fierce battle
The issue has become one of the hottest battlegrounds in consumer finance.
In recent months, California regulators battled OppFi over whether a partner bank was the “true lender” behind high-interest loans, while industry groups have argued fintech partnerships expand credit access to borrowers who might otherwise be shut out of traditional banking, as Ballard Spahr reported.
Consumer advocates counter that many fintech products resemble traditional payday loans with new branding.
A 2023 joint analysis by NCLC and the Center for Responsible Lending found some fintech cash advances carried effective APRs exceeding 200% or even 600% for ultra-short-term loans.
Crypto concerns
The order is also drawing scrutiny for encouraging broader integration of crypto and digital-asset firms into the financial system.
Among other provisions, the order asks the Federal Reserve to review whether uninsured institutions and nonbank fintech companies should gain broader access to Federal Reserve payment services and accounts.
NCLC attorney Carla Sanchez-Adams warned that consumers could mistake fintech or crypto-linked accounts for federally insured bank accounts.
“These accounts can mimic bank accounts but without clear consumer protections against fraud or deposit insurance,” Sanchez-Adams said.
The White House argues expanded access could promote competition and innovation in payments.
Consumer advocates split over fintech
Not all consumer-oriented groups oppose fintech innovation itself, but many are warning against loosening oversight too aggressively.
The National Community Reinvestment Coalition said the executive order “dresses up deregulation as innovation” and could allow fintech firms to gain access to banking infrastructure without equivalent obligations to consumers and communities.
Still, fintech firms and industry advocates have long argued that digital lending platforms can reduce borrowing costs, speed approvals and expand access to credit for consumers and small businesses underserved by traditional banks.
The Trump administration echoed that argument, saying the order would “help drive down costs and create greater economic opportunities for hardworking Americans.”
Debt Watch
The fight comes as Americans continue to grapple with elevated debt burdens, higher interest rates and persistent affordability pressures.
Consumer advocates say those conditions create fertile ground for high-cost lending products marketed as emergency cash solutions.
NCLC warned that weaker oversight could be especially dangerous now because the Consumer Financial Protection Bureau has been significantly weakened under the current administration.
Industry groups, meanwhile, argue tighter regulation can also reduce credit availability and increase borrowing costs for consumers with limited options.
The executive order is expected to trigger months of regulatory reviews and potential rule changes across banking and financial agencies.