WASHINGTON – A coalition of 325 organizations is calling for Congress to eliminate a Trump-era regulation that took effect in December they say could “unleash predatory lending in all 50 states.”
The groups are seeking to stop what they call the “fake lender rule” issued by the Office of the Comptroller of the Currency (OCC), which they allege would facilitate so-called “rent-a-bank” schemes whereby “predatory lenders launder their loans through a few rogue banks, which are exempt from state interest rate caps, through a superficial partnership meant to evade critical predatory lending rules.”
‘Guts the Power of States’
"The OCC's fake lender rule protects predatory lenders and guts the power that states have had since the time of the American Revolution to cap interest rates,” said Lauren Saunders, associate director of the National Consumer Law Center. “I urge Congress to quickly introduce a resolution to overturn this horrible OCC rule, which enables 179% loans that trap vulnerable consumers, especially low-income families and borrowers of color, into a devastating cycle of debt.”
The groups are calling for use of the Congressional Review Act, which they note was used more than a dozen times under President Trump, to rescind recently finalized regulations, including the OCC’s new rule, with just a majority vote in both chambers, limited debate, no filibuster, and the president’s signature.
“However, to be considered, there is a strict deadline for CRA resolutions to be introduced, estimated to be April 4,” the organizations said. “With spring recess coming up, the practical deadline is likely the end of this week. A CRA of the OCC ‘fake lender rule’ has not yet been introduced. These resolutions also must be voted upon by a certain date, currently estimated for some time between May 10 and May 21.”
The Signatories
The coalition of signatories to the letter consists of more than 300 groups, including civil rights, community, consumer, faith, housing, labor, legal services, senior rights, small business, student lending, and veterans organizations.
“(T)he rule replaces the longstanding ‘true lender’ anti-evasion doctrine with a ‘fake lender’ rule that allows lenders charging rates of 179% or higher to evade state and voter-approved interest rate caps merely by putting a bank’s name on the paperwork – just as payday lenders were doing in the early 2000s,” the letter reads. “These lenders charge triple-digit interest rates, target the financially vulnerable and communities of color, and trap consumers in devastating cycles of debt…. Currently, there are only a few of these rogue, predatory lenders, but they will spread to all 50 states if the OCC rule is not overturned.”
The letter can be found here.