• Twenty state attorneys general have urged federal regulators to block proposed bank acquisitions by Opportunity Financial and Enova
• The coalition argues the deals could weaken consumer protections by facilitating high-interest lending beyond state usury limits
• Both companies say becoming regulated banks would strengthen oversight and consumer safeguards
• The attorneys general also criticized regulators for granting trust charters to cryptocurrency firms
• The cases are expected to shape future regulatory policy on fintech access to the U.S. banking system

A coalition of 20 state attorneys general has urged U.S. banking regulators to reject two proposed acquisitions that would allow high-cost consumer lenders to acquire federally regulated banks, arguing the transactions threaten consumer protections and could encourage riskier lending practices across the financial system.

In a letter sent to the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Federal Reserve, the attorneys general called on regulators to block Opportunity Financial's proposed $130 million acquisition of an Arizona bank and Enova International's planned $369 million purchase of Grasshopper Bank.

Led by Illinois Attorney General Kwame Raoul, the coalition argued that granting banking charters to companies with business models centered on high-interest lending would undermine state usury laws designed to protect borrowers from excessive interest rates.

"As the regulators that manage national bank charters, bank holding companies, and deposit insurance, you collectively determine who is allowed access to national banking privileges and what responsibilities and conditions they must meet," the attorneys general wrote.

"We urge you to prohibit such access to entities that have a track record of brazenly attempting to evade state law and disregarding consumer protections."

The letter was also signed by attorneys general from Arizona, California, Colorado, Connecticut, the District of Columbia, Hawaii, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont and Washington.

The group argued that nearly every U.S. state has established statutory limits on consumer lending rates, with many capping smaller loans at 36% annual interest or less.

According to the letter, partnerships between fintech lenders and banks located in states without interest rate caps have enabled lenders to offer loans nationwide at rates exceeding those permitted under many state laws.

"These arrangements are deliberate efforts to avoid state usury laws and to extract profit from those that are in desperate need of money," the attorneys general wrote.

The challenge highlights a growing debate over so-called "bank partnership" models, in which nonbank lenders work with federally chartered or state-chartered banks to originate loans that may benefit from federal interest rate exportation rules. Consumer advocates have long argued that the arrangements enable lenders to bypass state lending restrictions, while supporters contend they expand access to credit for consumers underserved by traditional banks.

Both companies rejected suggestions that their business models weaken consumer protections.

An Opportunity Financial spokesperson said the company's lending platform is "highly compliant, legally robust, and consumer-friendly."

"Moving this model into a regulated banking infrastructure will enable us to pair our proven product with extensive federal oversight, further strengthening our commitment to transparent and fair consumer lending," the spokesperson said.

Enova also defended its proposed acquisition. Chief Strategy Officer Kirk Chartier noted that a separate coalition of 21 state attorneys general recently supported a bank's ability to export home-state interest rates in federal court.

He said that, as a national bank, Enova "would operate under full federal banking agency supervision and consumer protections and in compliance with applicable federal and state laws and interagency lending guidance."

The attorneys general also used the letter to criticize regulators' broader approach to charter approvals, expressing concern about national trust charters issued to cryptocurrency firms.

They argued that expanding access to federal banking privileges for digital asset businesses could "amplify risk and instability to the financial system" while encouraging what they described as a regulatory "race to the bottom."

Those concerns echo objections previously raised by several banking trade associations, which have questioned whether trust charters provide an appropriate supervisory framework for certain cryptocurrency activities.

However, Comptroller of the Currency Jonathan Gould has defended allowing appropriately supervised digital asset activities within the regulated banking system.

Speaking previously about crypto oversight, Gould argued, "It's better for it to be done within the banking system, if it's legally permissible and can be done in a safe and sound manner, so that we can see it and monitor it, versus an ostrich approach, where we put our head in the sand and we're not really observing what's going on out there."

The regulators have not indicated when decisions on either acquisition will be made.

Whatever the outcome, the cases are expected to become important tests of how U.S. banking supervisors balance financial innovation, competition and consumer protection as fintech firms continue seeking greater access to the federal banking system.