Will Enova owe $5M fee after stall-out of Grasshopper deal?

The attempted acquisition of Grasshopper Bancorp by Enova International has collapsed after federal regulators failed to approve the deal within the agreed-upon timeframe. For retailers and operators, this is a signal that the regulatory environment remains frosty for non-bank lenders trying to acquire traditional banking charters. Enova is a major player in the subprime and near-prime consumer lending space. Their move to buy a bank was intended to lower their cost of funds, which theoretically allows for more competitive rates and higher approval volumes for the merchants they serve. With the deal now dead, Enova faces a potential $5 million termination fee. More importantly, the 'stalling out' at the regulatory level shows that the FDIC and other agencies are scrutinizing consumer finance companies very closely before letting them hold bank deposits. If you use Enova’s financing products or similar fintech platforms, this news suggests these lenders will continue to rely on third-party bank partners rather than becoming banks themselves. This keeps their costs higher than traditional banks, which ultimately impacts the terms and interest rates passed down to your customers. Expect lenders to remain cautious as they navigate a tough political and regulatory landscape through the end of the year.

Source: American Banker — Top News

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