• Independence Bank received FDIC approval to liquidate after a dispute over fraudulent SBA loan practices.
• The bank was accused of charging illegal fees on SBA 7(a) loans, causing an $8.8M loss to the government.
• Loans had excessive interest rates (50-100%), leading to a default rate five times higher than peers.
• Independence Bank sued regulators in 2023, claiming regulatory overreach prevented liquidation.
• FDIC countered that the bank had to meet obligations before terminating deposit insurance.

Independence Bank, a small Rhode Island lender, has received approval from the Federal Deposit Insurance Corp. (FDIC) to move forward with its liquidation plans after a years-long dispute with regulators over its involvement in an alleged fraudulent loan scheme.

The bank was accused of illegally charging fees for Small Business Administration (SBA) 7(a) loans, which led to an estimated $8.8 million loss for the government agency.

The FDIC ordered the East Greenwich-based bank to pay $3.5 million in restitution to affected consumers as part of a settlement that paves the way for its voluntary dissolution.

This development follows last week’s decision by BP to scale back its climate targets, underscoring a growing trend of institutions retreating from previous commitments amid mounting financial and regulatory pressures.

Just as BP cited market conditions and external constraints in its justification for abandoning its net-zero goals, Independence Bank claimed it had been trapped in an unmanageable regulatory ordeal.

The lender argued that the FDIC's oversight made it impossible to move forward while adhering to compliance requirements, ultimately leading to its decision to surrender its charter and terminate deposit insurance.

The bank’s legal troubles stemmed from allegations that its former executives, including ex-CEO Robert S. Catanzaro, former COO Danielle M. Desrosiers, and loan referral agent John C. Ponte, engaged in a scheme that involved charging excessive fees and issuing high-risk loans under false pretenses.

The FDIC reported that Ponte's company referred the majority of the SBA loans Independence Bank issued, with interest rates on associated bridge loans reaching between 50% and 100%.

The hidden nature of these transactions led to an abnormally high default rate—five times that of peer banks—resulting in significant financial losses for the SBA.

Regulators accused Catanzaro of pushing the bank into an unsustainable, non-diversified SBA lending strategy while ignoring repeated FDIC warnings about risk management deficiencies.

Desrosiers, who allegedly had an undisclosed romantic relationship with Ponte, was also implicated for failing to disclose conflicts of interest and later left the bank in 2018.

The FDIC imposed industry bans and fines on all three individuals involved in the scheme.

After facing mounting regulatory scrutiny, Independence Bank filed a lawsuit against the FDIC and Rhode Island Department of Business Regulation in October 2023, alleging that the agencies had engaged in overreach and were preventing the bank from executing an orderly wind-down.

The bank’s legal battle ended on January 15 when its case was dismissed, along with separate lawsuits Ponte had filed against the FDIC in federal court.

The regulator also officially terminated a 2019 consent order against the bank, clearing the way for its dissolution. While the FDIC had initially sought $6.9 million in restitution, the final settlement required Independence Bank to pay just over half that amount.