WA: Testimony in Opposition to Washington State SSB 6025

TO: The House Committee on Consumer Protection & Business‍

FROM: Ian P. Moloney, Senior Vice President, Head of Policy and Regulatory Affairs, American Fintech Council‍

DATE: February 14, 2024‍

SUBJECT: Substitute Senate Bill 6025‍

Position: Oppose.

Testimony:‍

Thank you Chair Walen, Vice-Chair Reeves, and members of the House Committee on Consumer Protection & Business for providing me the opportunity to testify before you in opposition to Substitute Senate Bill 6025 (SSB 6025). My name is Ian Moloney, I am the Senior Vice President, Head of Policy and Regulatory Affairs at the American Fintech Council (AFC).

AFC’s mission is to promote an innovative, transparent, inclusive, and customer-centric financial system by supporting responsible innovation in financial technology (Fintech) and encouraging sound public policy. AFC members are at the forefront of fostering competition in consumer finance and pioneering ways to better serve underserved consumer segments and geographies.

Unfortunately, while AFC agrees with the ideals of the bill to protect consumers from predatory loans, we believe that the bill, in its current form, would actually decrease access to credit by establishing an unclear standard and inadequate test for evaluating the true lender of a loan. Specifically, this bill would be incongruent with long-standing judicial and regulatory precedence, which finds that financial institutions, who originate the loans in a bank-fintech partnership, are in fact the true lender.

In addition, SSB 6025 promulgates a “predominant economic interest test” to evaluate the true lender of the loan. AFC has opposed the use of this test for determining the true lender, because it does not adequately represent the myriad requirements and practices detailed in a responsible bank-fintech partnership, and it stands in opposition to the long-standing true lender precedence that I noted above. In practice, the use of a predominant economic interest test to determine the true lender of the loan will limit the ability for responsible banks and fintechs to operate in Washington and, in turn, limit the availability of credit for Washingtonians who need it the most.

In closing, I thank you again for the opportunity to raise my concerns regarding SSB 6025. I hope that you take this opportunity to table the bill for further study about the impacts to Washington consumers. I am happy to answer any questions you may have.