05/22/2025
March 23, 2025, Maine Sunday Telegram
"State lawmakers are considering a bill that supporters say would make it easier for Mainers with low credit scores to take out small loans: the law would give financial technology companies more leeway to partner with out-of-state banks and thus get around the state’s rate caps.
Opponents say the measure would undo protections against predatory lenders and leave consumers on the hook for much higher payments.
Maine has a 30 percent cap on interest rates for small-dollar loans up to $2,000, which has been in effect since 1997. The bill would allow financial technology or “fintech” companies to get around this cap, making it more attractive to offer small loans in the state while allowing the potential costs for borrowers to balloon.
The legislation, L.D. 314, would allow fintech companies, which would normally be subject to Maine’s rate caps, to partner with out-of-state banks in what multiple people called a “rent-a-bank scheme.” Out-of-state banks are able to lend to Mainers while subject to regulations in their own states — some of which have much higher interest rate caps or don’t have them at all.
In 2021, state lawmakers passed legislation to close this loophole: The measure established that the party with the major economic interest in the loan, such as a financial technology company, is the true lender and therefore is subject to Maine law. Opponents say L.D. 314 would undo those protections.
Attorney General Aaron Frey submitted testimony against L.D. 314, saying it would repeal a rule that is “a crucial tool that protects Maine’s consumers from predatory, out-of-state, unregulated lenders.”
Because of the way it’s written, the measure would also exempt nearly all traditional lending institutions, including banks and credit unions, from the interest rate caps, he added.
“This is the third attempt since 2021 by the fintech industry to repeal this important consumer protection,” Frey said in his testimony. “The Legislature rejected each of the previous attempts, and I urge it to do so again now.”
Rep. Anne-Marie Mastraccio, a Democrat from Sanford who sponsored L.D. 314, said in her testimony that the 2021 measure greatly constricted the availability of small-dollar loans to Mainers with subprime credit scores. As a result, Mainers who need emergency access to credit have few safe options left, she said." - The Maine Monitor, "A new bill could make it easier for Mainers to get small loans. It would also allow lenders to charge more." by Rose Lundy, February 23, 2025