In recent years, predatory fintech firms have used deceitful marketing to pose as safe, traditional banks—all while evading the banking laws that protect customers and the financial system.
Imitation banks promise unusually high returns and sometimes even claim to offer “deposits” and “savings” accounts, but their activities aren’t subject to the regulatory oversight that governs traditional banks—making them dangerous options for vulnerable consumers. In a new brief, Todd Phillips, Roosevelt Institute fellow and assistant professor at the Robinson College of Business at Georgia State University, exposes the imitation bank playbook.
“Like crypto issuers in years past,” Phillips writes, “imitation banks make specious promises of high returns to gain ground with consumers who may have been historically locked out of more traditional wealth-building opportunities.”
The brief outlines how to rein in imitation banks, including by using the powers of existing agencies like the Securities and Exchange Commission and Consumer Financial Protection Bureau, and by calling on Congress to consider new legislation.
Read more in “Imitation Banks: Abusing the Public’s Faith in Banks.”
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