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106 Iowa L. Rev. 1739 (2020-2021)
Predatory Fintech and the Politics of Banking

handle is hein.journals/ilr106 and id is 1749 raw text is: Predatory Fintech and the Politics of Banking Christopher K. Odinet* ABSTRACT: With American families living on the financial edge and seeking out high-cost loans even before COVID-19, the term financial technology or fintechhas been used like an incantation aimed at remedying everything that's wrong with America's financial system. Scholars and supporters from both the public and private sector proclaim that innovations in financial technology will bank the unbanked and open new channels to affordable credit. This exuberance for all things tech in finance has led to a quiet yet aggressive deregulatory agenda, including, as of late, a federal assault via rulemaking on the ability of states to police the cost and privilege of extending credit within their borders. This deregulation and the ethos behind it have made space for growth in high-cost, predatory lending that reaches across state lines via websites and smart phones and aggressively targets cash-strapped families. These loans are made using a business model whereby funds are funneled through a group of lightly regulated banks in a way designed to take advantage offederalpreemption. Fintech companies rent out and profit from the special legal status of these bank partners, which in turn keeps the bank's involvement in the shadows. Stripping down predatory fintech's practices and showing them for what they really are, this Article situates fintech in the context of this country's longstanding dual banking wars, both between states and the federal government and between consumer advocates and banking regulators. And it points the way forward for scholars and regulators willing to shake off fintech's hypnotic effect. This means, in the short term, using existing regulatory tools to curtail the dangerous lending identified here, including by taking a more expansive view of what it means for a bank to operate safely and soundly under the law. In the long term, it * Christopher K. Odinet, Professor of Law, University of Iowa College of Law. The Author thanks the participants of the Financial Regulation Workshop in January 2020 for their helpful comments, questions, and critiques on earlier versions of this paper, with particular thanks to Anna Gelpern, Lydia Beyoud, Arthur Wilmarth, David Zaring, Rory Van Loo, Patricia McCoy, Adam Levitin, Sean Sullivan, Anya Prince, Mihailis Diamantis, and Derek Muller. For research support, the Author thanks Charles Ward (Iowa Law Class of 2022) and Iowa Law librarian Amy Koopmann. This work is the fourth in a series of articles under the auspices of the Fintech Finance Project, which studies the development of law and innovation in lending. All errors and views are the Author's alone. 1739

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