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Transportation Alliance Bank (TAB Bank) in Ogden, Utah, has a partnership with a fintech called EasyPay Finance that appears to advance the bank’s financial inclusion goal – it lends to people with low FICO scores who couldn’t get credit elsewhere – but the relationship has drawn criticism from animal and consumer rights activists.
Part of EasyPay’s business is providing pet loans to stores that buy their dogs from abusive puppy mills, where animals are kept in tiny cages, abused, malnourished and not given proper care. appropriate medical treatment, according to animal rights groups. The loans also have interest rates as high as 188.99%, according to the National Consumer Law Center.
TAB Bank initially denied that its work with EasyPay Finance of Carlsbad, Calif. directly or indirectly funded puppy mills – and indeed it can be very difficult for lenders to find out about such relationships.
“We have assurances from retailers that they are verifying and tracking the sources of their pets,” Curt Queyrouze, CEO of $1.2 billion asset TAB Bank, said when he was first contacted by American Banker for this story.
Queyrouze, who has a rescue dog at home, reassessed that statement after the National Consumer Law Center provided evidence of a loan that funded the purchase of a pet raised in a puppy mill. The NCLC and the Humane Society called out EasyPay Finance and TAB Bank in February for providing loans to puppy mills.
Queyrouze spoke this week with people from the Humane Society about the issue.
“At this point, we are committed to continuing our research to assess the pet funding vertical and ensure that we are not unknowingly contributing to the support of bad actors,” Queyrouze said. “We are committed to taking the appropriate measures to eliminate this risk for pets and future owners.”
The case highlights the risks banks take when they partner with fintechs. It is possible that the fintech partner provides high-interest payday loans that trigger complaints from consumers and regulators. Fintechs could also be too aggressive in detecting fraud and mistakenly close accounts of innocent customers without the support of customer service to remedy the situation. There is the risk that a fintech is disabled by fraud.
Add to that list the danger of inadvertently making loans to a puppy mill.
Some states have banned pet stores from selling dogs, knowing that most come from puppy mills.
“Of course, none of the pet stores selling puppies will say they sell puppies from factories,” said John Goodwin, senior director of the Humane Society. “The game pet stores are playing is a game of semantics, redefining what a puppy mill is to describe any breeder other than the ones they use.”
Large kennels that supply pet stores tend to view dogs as production units rather than pets, he said.
“Commercial USDA-licensed dog-breeding kennels typically have dozens or even hundreds of dogs, and stores will say these facilities don’t meet the definition of a puppy mill,” a said Goodwin. “A USDA licensed dog breeder can keep a dog in a crate just six inches longer than its body for its entire life. They can, and do, raise mothers on each heat cycle until their bodies are exhausted, in order to maximize production.
The Humane Society investigated pet stores in New York, California, Virginia, Georgia, and Illinois and found that they all used high-volume breeding operations.
The NCLC shared with American Banker a loan agreement for an EasyPay-TAB Bank loan that was made through the Hicksville, New York-based Shake A Paw pet store chain. The loan facilitated the purchase of a puppy for $3,864.09 with a down payment of $1,364.09 and a loan of $2,500 with an annual percentage rate of 151.98%.
In December, New York Attorney General Letitia James sued Shake A Paw for selling hundreds of sick or injured puppies that often died within days for $2,500 to $8,000 per dog. (In New York, it costs about $400 to adopt a healthy dog from a rescue organization.)
The dogs were sick because they came from large-scale puppy mills, including Blue Ribbon Puppies in Indiana, the lawsuit said. For the shared loan agreement with American Banker, the Humane Society traced the purchase to Blue Ribbon Puppies.
“Puppies raised in puppy mills are kept in facilities that have little or no concern for animal welfare,” the New York attorney general’s lawsuit said. “Puppies are subjected to improper housing, shelter, endowment, nutrition, socialization, sanitation, exercise, veterinary care and/or husbandry.”
Shake A Paw owners do not disclose the sources of their puppies, a practice known as “puppy laundering,” he said.
The attorney general was alerted to Shake A Paw by 99 consumer complaints the office had received about the chain store since 2016.
“We do our best to ensure that the animal sellers we do business with and their suppliers treat their animals humanely,” EasyPay CEO Mary Jones said in a statement. “Through funding through the EasyPay platform, we have helped bring love and joy to many pet buyers and their new puppies over the past year. We have not received any complaints regarding health or the condition of these puppies.
Goodwin acknowledged that lenders might overlook the animal abuse underlying their loans.
“Third-party finance companies are just that, third parties,” he said. “They have no say in where the puppies come from and are unlikely to be the ones an aggrieved customer goes to after their pup falls ill or dies. The good news is that companies like EasyPay can take a stand against puppy mills by no longer funding pet purchases. Such a decision would have a negligible effect on their income, while sparing many mother dogs a life spent in a puppy mill cage.
Jones acknowledged EasyPay’s high credit costs.
“But high rates are the only way for banks to extend credit to people in difficulty,” Jones said in his statement. “We believe customers are in the best position to decide whether a financed purchase is in their best interest.”
Goodwin would like to see finance companies end pet loans.
“The only way for these finance companies to avoid supporting puppy mills is to stop offering pet loans,” he said.