WASHINGTON–Three members of Congress have introduced Congressional Review Act (CRA) resolutions designed to eliminate a Trump-era regulation that allows lenders charging 179% APR or more evade state- and voter-approved interest rate caps, known as the “fake lender” rule.
Sen. Chris Van Hollen (D-MD), Sen. Sherrod Brown (D-OH), and Rep. Jesus “Chuy” García (D-IL) have introduced the resolutions in their respective bodies of Congress. The move is being hailed by a broad array of consumer groups, including the 325 that recently signed a letter to Congress calling for the “fake lender” rule to be addressed.
Those groups said the “fake lender” rule was rushed into taking effect in December 2020 by the Office of the Comptroller of the Currency (OCC). The rule protects “rent-a-bank” schemes whereby predatory lenders, the true lender, “launder their loans through a few rogue banks (the fake lender), in order to claim that it is a “bank loan” exempt from state interest rate caps, the groups said.
‘Banks Have No Business’
“Banks have no business helping payday lenders and other predatory lenders evade state and voter approved rate caps, often on a bipartisan basis, like the one 83% of Nebraska voters approved in November 2020 to cap rates at 36%,” said Lauren Saunders, associate director of the National Consumer Law Center. “We applaud Senator Van Hollen, Senator Brown and Representative Garcia for introducing resolutions to overturn the OCC’s horrible fake lender rule. The OCC “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. It enables 179% loans that trap vulnerable consumers, especially low-income families and borrowers of color, into a devastating cycle of debt.”