WASHINGTON—With the former acting chief of the Office of the Comptroller of the Currency issuing a warning that overturning his agency's "true lender" rule could reduce credit available to many consumers, Senators adjourned a hearing on so-called “rent-a-bank” schemes with little indication how the issue might ultimately be settled.
The hearing came as numerous consumer groups and a group of state attorneys general have called for an end to a practice they say leads to firms being able to offer highly usurious rates on loans.
The same hearing by the Senate Banking Committee also included discussion of how to prevent predatory lending practices and ensure low-income, underserved communities have access to safe, affordable financial services.
As CUToday.info has reported, at the core of lawmakers' discussion is the Office of the Comptroller of the Currency's (OCC) true lender rule, which allows banks and federal savings and loan companies to provide their charter to online lenders. The practice, say critics, results in those lenders charging high-cost loans with annual rates over 100%, evading state consumer protections and usury caps and promoting predatory payday loans.
NAFCU Among Those With ‘Concerns’
Among the groups that shared “concerns” ahead of the hearing was NAFCU reported, which said among other issues "payday lenders are operating on an uneven playing field, relying upon the benefits of the OCC’s federal preemption to circumvent consumer protections and place borrowers in harms’ way."
Some lawmakers shared similar concerns. Committee Democrats expressed support for S.J. Res. 15, which would use the Congressional Review Act to nullify the true lender rule. As CUToday.info reported, NAFCU also offered its support for this joint resolution in a letter to the committee sent before the hearing, and consumer groups have similarly advocated for using the CRA.
Republicans on the committee, however, indicated overturning the true lender rule would limit other bank partnerships, such as those emerging with fintechs, and could limit access to credit for borrowers in need.