WASHINGTON—The House of Representatives has overturned the Office of the Comptroller of the Currency’s “True Lender Rule,” and the resolution is now on its way to President Biden for his signature.
The Senate had voted in May to also overturn the rule that had been billed as making it easier for national banks to make and sell loans through fintech partners but which critics had blasted as a “rent-a-bank” scheme that allowed lender to use bank charters to make loans with outrageously high rates.
In response, the acting Comptroller of the Currency, Michael J. Hsu, issued a statement saying, “We respect the role of Congress in reviewing regulations under the Congressional Review Act. As we anticipate President Biden signing the resolution, I want to reaffirm the agency’s long-standing position that predatory lending has no place in the federal banking system.”
Moving forward, Hsu said the agency would consider policy options that “protect consumers while expanding financial inclusion.” He said those priorities are part of the agency’s mission to ensure national banks and savings associations “provide fair access to financial services for all Americans and that customers are treated fairly.”
Trade Groups Send Letter
Prior to the vote, both CUNA and NAFCU had called on House to support a resolution to use the Congressional Review Act to overturn the “true lender” rule, which took effect in December 2020.
“At a time when low-income consumers can least afford it, the OCC’s rule is enabling high-cost lenders to prey on consumers that are on even more precarious financial footing, which could threaten COVID-19 economic recovery efforts and the good work of consumer-friendly financial institutions like credit unions,” wrote Brad Thaler, NAFCU vice president of legislative affairs. “
Thaler also recommended allowing all credit unions to add underserved areas to their fields of membership, which would provide consumers with options for lower cost and safer financial products.
CUNA Cites Potential Exploitation
CUNA, in its letter, stated the true lender proposal could be exploited to promote “rent-a-charter” arrangements.
“We believe the OCC’s final rule is not in the best interest of consumers and should be withdrawn. Instead, the OCC, in coordination with its sister banking regulators, should focus its relief efforts on facilitating and promoting the fair and reasonable loan options that are offered by local-community based lenders like credit unions,” CUNA’s letter read.