Overly restrictive rate caps and legal uncertainty around bank-fintech partnerships have curtailed tens of thousands of loans in the state

Olympia, WA (April 17, 2025) – The American Fintech Council (AFC), the premier industry association representing responsible fintech companies and innovative banks, sent a letter to the Washington Department of Financial Institutions (DFI) in response to DFI’s request for comment on the implementation of the state’s Predatory Loan Prevention Act (PLPA). AFC’s letter underscores its strong support for consumer protections against predatory lending while urging the DFI to pursue thoughtful revisions that support financial inclusion and avoid unintended harm to underserved borrowers – principles AFC has emphasized in multiple trips to Olympia to meet with DFI over the past two years.

AFC expresses concern that the current implementation of the PLPA has led to a significant decline in lending across Washington, disproportionately impacting low- and moderate-income communities. Analysis by AFC’s members shows that tens of thousands of loans—totaling millions of dollars in lost credit access—have been curtailed as a result of overly restrictive interest rate caps and legal uncertainty around bank-fintech partnerships.

“Washington’s goals of eradicating payday lending and protecting consumers are laudable, but the current implementation of the PLPA has unintentionally limited access to affordable credit for the very communities the law seeks to protect,” said Phil Goldfeder, Chief Executive Officer of AFC. “We support reasonable rate caps and strong consumer protections, but the current framework harms the consumers who most need access to responsible credit. We urge DFI to pursue balanced, pragmatic reforms that restore access to credit and resolve legal uncertainties.”

AFC’s letter raises three major areas of concern. First, the current cap of 25% interest effectively blocks responsible bank-fintech partnerships from operating in the state, even when their products remain well below the 36% threshold broadly recognized as a safeguard against predatory lending. Second, AFC points to the legal risks of Washington’s newly codified “true lender” tests, which include vague definitions and conflict with long-standing federal preemption standards. And third, the comment identifies critical gaps in licensing guidance and urges DFI to clarify its interpretation of the “totality of the circumstances” and “predominant economic interest” tests before enforcing them.

“The lack of regulatory clarity in the current law exposes the state to legal challenges and creates confusion for responsible industry participants trying to comply in good faith,” said Ian P. Moloney, SVP and Head of Policy and Regulatory Affairs at AFC. “We believe that by refining the law’s definitions and aligning its provisions with existing federal frameworks, Washington can protect consumers without undermining access to safe, transparent credit.”

The letter encourages the Department to issue additional guidance that aligns with federal banking laws and long-standing legal precedent, including federal preemption for rate exportation and the established practice of identifying the bank as the true lender when it originates the loan. AFC also recommends that DFI establish clear thresholds and enforcement standards, particularly in regard to the predominant economic interest test, to ensure that responsible bank-fintech partnerships can continue serving Washington borrowers without ambiguity.

A standards-based organization, AFC is the premier trade association representing the largest financial technology (Fintech) companies and innovative banks offering embedded finance solutions. AFC’s mission is to promote a transparent, inclusive, and customer-centric financial system by supporting responsible innovation in financial services and encouraging sound public policy. AFC members foster competition in consumer finance and pioneer products to better serve underserved consumer segments and geographies.

‍