Bank moves to flat-fee financing after FDIC rebuke

Publish Date: 
Mar 5, 2014

OAK BROOK, Ill. – Evergreen Bank Group has changed its dealer lending structure from variable rates to flat fees in the wake of a low rating from the Federal Deposit Insurance Corp. (FDIC).

More than half – $216 million – of Oak Brook, Ill.-based Evergreen's $405 million in total loans is made through dealerships to motorcycle buyers, a profitable business credited for Evergreen's relatively high 14.5 percent return on equity in 2013, according to Crain’s Chicago BusinessThe bank is located in Oak Brook, a western suburb of Chicago.

The bank said the FDIC alleged it had violated federal law by offering variable interest rates to motorcycle buyers. That drew a rating of substantial noncompliance with the federal Community Reinvestment Act (CRA), the lowest ranking possible. The 1977 CRA requires banks to invest in their own communities, as well as low- and moderate-income neighborhoods.

The FDIC based its findings upon a statistical analysis that determined borrowers with similar characteristics were treated differently, the bank said.

While the bank disputes the FDIC's determination, the statement said it has changed its variable pricing practice to a flat-fee system “even though variable pricing is the standard in the industry, making the bank one of the first lenders across the country to eliminate discretionary pricing options previously made available to dealerships.”

It now pays dealers a fixed amount for their work.

Separately, regulators also hit the bank with a “needs to improve” rating on its lending overall, essentially chiding the bank for concentrating so much of its lending outside its Chicago area market, the bank said.

“The bank is an active lender in the local markets it serves, and this was the first CRA evaluation of the bank since the start of the dealership lending program in early 2007,” the bank said.

Posted by Holly Wagner