WASHINGTON–While numerous groups have praised Congress for its resolution that led the OCC to withdraw its “True Lender” rule, at least one consumer group is warning that there is “more work to be done.”
The National Consumer Law Center, which refers to the True Lender rule as the “fake lender” rule, as it allows “predatory lenders to evade state interest rate laws by putting a federally-chartered bank’s name on the paperwork,” said “predatory rent-a-bank schemes are destroying small businesses, homes, and lives.”
But NCLC Associate Director Lauren Saunders warned in a statement that more action is needed to stop predatory rent-a-bank lenders from evading state interest rate laws.
“The OCC and especially the FDIC must crack down on the banks that are helping predatory lenders evade state laws so that they can charge rates up to 200% APR,” said Saunders. “Congress also must pass a national 36% interest rate limit that covers all lenders, including banks, so that rent-a-bank schemes cannot be used by high-cost lenders to evade state laws.”
268% APR
The NCLC issued its statement on the same day the NCUA board again renewed the 18% interest rate ceiling for federal credit unions.
According to the National Consumer Law Center, “predatory small business lenders” have been using the OCC’s True Lender rule to defend a 268% APR rate on loans totaling $67,000 to a restaurant owner in New York, where the criminal usury rate is 25% and to allow the online lender OppLoans (aka OppFi) to offer 160% APR loans in 26 states that prohibit triple-digit rate loans, among other companies making similar offers.”