The House next week will consider a resolution that would rescind a Trump Administration rule by the Office of the Comptroller of the Currency that credit union trade groups contend allows predatory online lenders to “rent” a bank to evade consumer protection laws.
“In order to rein in predatory lenders and ‘rent-a-bank’ schemes, S.J. Res. 15 would overturn a rule by the Office of the Comptroller of the Currency and allow states once again to regulate these lenders and protect consumers,” House Majority Leader Steny Hoyer (D-Md.) wrote in a letter to colleagues outlining the June House agenda.
Republicans have argued that repealing the rule would limit consumer access to credit.
The Senate passed the resolution last month; if the House passes it, it would go to President Biden, who has said he will sign it. If he signs it, the OCC would be prohibited from issuing a rule that would accomplish the same thing.
The OCC rule allows banks and savings and loans to provide their charter to online lenders with annual interest rates exceeding 100%, Brad Thaler, NAFCU’s vice president of legislative affairs wrote in a letter to House leaders supporting the repeal resolution. Such an arrangement allows lenders to evade state consumer protections and usury caps, he said.
CUNA President/CEO Jim Nussle agreed. “We believe the OCC’s final rule is not in the best interest of consumers and should be withdrawn,” he wrote in a letter to senators when the Senate was considering the issue.
Banking trade groups, on the other hand, said while the OCC rule is flawed, enacting the resolution would prohibit the agency from correcting it. “Invalidating the rule through a Joint Resolution would create significant legal impediments to creating a more robust framework for providing safe and affordable credit to consumers,” the banking groups, including the American Bankers Association and the Independent Community Bankers of America wrote in a letter to House members.
Consumer groups support the repeal. “The rule facilitates rogue banks lending their name to rent-a-bank lending schemes, as all that is necessary for the bank to be the ‘true lender’ is the bank’s name on the loan agreement,” the Center for Responsible Lending said, in saying that the rule allows lenders to “launder” loans.