WASHINGTON, D.C. – Yesterday, President Biden signed bipartisan Congressional legislation rescinding the misleadingly named “true lender” rule issued by the Office of the Comptroller of the Currency (OCC) late last year. Sen. Chris Van Hollen (D-Md.), Senate Banking Chair Sherrod Brown (D-Ohio), House Financial Services Chair Maxine Waters (D-CA), and Rep. Jesus “Chuy” Garcia (D-IL) led the push to overturn the rule.
The rule enabled the “rent-a-bank” scheme, in which high-cost lenders pay a bank willing to pose as the lender on loan documents in order to charge interest rates far in excess of state limits, from which banks are generally exempt.
Center for Responsible Lending (CRL) Director of Federal Campaigns Graciela Aponte-Diaz issued the following statement:
We applaud the President and the U.S. Congress for rescinding the harmful OCC rule, which would have severely undercut consumer protection laws that states have had in place for decades to constrain predatory lending within their borders.
Forty-five states impose interest rate caps on some consumer loans, and eighteen states plus the District of Columbia keep payday loans out of their borders with rate caps of 36% or less. Payday loans have by design trapped millions of U.S. families in debilitating debt at rates averaging 400%. The state caps are essential in stopping a practice that is designed to draw endless repeat payments from the bank accounts of low-income people, often until their accounts are lost and they may be forced to file bankruptcy. As with so many societal ills, Black, Latinx and low-income people are disproportionately impacted by predatory lending.
While eliminating this harmful rule was essential, banking regulators must also stamp out the rent-a-bank schemes that will persist even despite the overturning of this harmful rule. And our nation must move forward to eliminate predatory lending across the country by capping interest rates for all consumer lending.
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Press Contact: carol.parish@responsiblelending.org