First Bank of Delaware Making Payday Loans in Five States

April 15, 2003
Jean Ann Fox, CFA 757-867-7523
Peter Skillern, CRA-NC 919-667-1557 ext. 22
Rachel Maleh, NCRC 202-628-8866 ext. 3013

Washington, DC: Consumer and community groups called on the Federal Reserve Board to stop the nation's only Fed-member state bank from making payday loans. Payday loans are quick cash loans based on the borrower's personal check held for future deposit that cost triple digit interest rates. Advocates argue that payday lending abuse is based on repeat transactions that capture borrowers on a debt tread mill.

"First Bank of Delaware is renting its charter to storefront payday lenders," stated Jean Ann Fox of Consumer Federation of America (CFA). "Now that national banks and thrifts are out of the rent-a-bank payday loan business, payday lenders are turning to small state banks to make loans they couldn't legally make on their own."

First Bank of Delaware is a small Delaware-chartered state bank, owned by Republic First Bancorp in Philadelphia. Payday lending is a major part of the bank's business, with $5 million in payday loans outstanding as of the end of 2002, or 20% of First Bank's total assets. Payday lenders partner with the bank in hopes of exporting Delaware's deregulated interest rates to states that prohibit or restrict payday loans.

"First Bank of Delaware is small, but the issue is big. Will the Federal Reserve allow its banks to be high cost payday lenders?" stated Peter Skillern, Executive Director of the Community Reinvestment Association of North Carolina (CRA*NC).

Sixty-six local and national consumer and community organizations petitioned the Federal Reserve Board to halt First Bank of Delaware from partnering with payday lenders Check Into Cash, Dollar Financial Group, and The Cash Store. Loans made in North Carolina, Georgia, Texas, and California by First Bank and its payday loan partners exceed state small loan rate caps or payday loan term limits.

The Office of the Comptroller of the Currency took regulatory action, based on safety and soundness risks, in the last year against all four national banks it regulates that were involved in payday lending. In September 2002, the Federal Deposit Insurance Corporation stopped Brickyard Bank, an Illinois state bank, from making payday loans through Check'n Go in North Carolina and Texas. The OTS insisted that First Place Bank halt its payday loan arrangements with Check'n Go in Texas and gave a "Needs to Improve" rating in its Community Reinvestment Act evaluation to Crusader Bank, a federal Thrift now out of the payday lending business. The FDIC is considering guidance for state-chartered non-member banks.

"This is the antithesis of CRA's mandate to serve low and moderate income people with safe and sound loans. Payday lending strips wealth from borrowers and is unsafe. We expect the Federal Reserve Board to clamp down on this latest rent-a-charter scam," stated John Taylor, President and CEO of NCRC.

The letter from 66 groups to the FRB is posted at and

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Consumer Federation of America is a non-profit association of about 300 pro-consumer organizations.

Community Reinvestment Association of North Carolina is a nonprofit bank watchdog agency based in Durham, NC.

NCRC is a national not-for-profit membership organization of 600 community groups working for economic justice and fair access to credit, capital and financial services.