The Senate on Tuesday passed a resolution that would rescind a Trump Administration rule that credit union trade groups say allows predatory online lenders to “rent” a bank to evade consumer protection laws.
The Senate passed the resolution 52-47; it now goes to the House. If the House passes it and President Biden signs it, the rule, issued by the Trump Administration’s Office of the Comptroller of the Currency, would be rescinded. In addition, the OCC would be prohibited from issuing a rule that would accomplish the same goal.
Credit union trade groups joined Democrats in opposing the OCC rule and they favor rescinding it. They said the so-called “rent-a-bank” rule allows online lenders to partner with banks and to originate loans in the name of the OCC-chartered bank. That way, they contend, the online lender can evade state loan interest rate caps.
“While the Trump Administration aimed to dismantle consumer protections, today’s action to strike down the ‘Rent-A-Bank’ rule will help prevent predatory lenders from ripping off consumers by charging loan-shark rates under deceptive terms,” Sen. Chris Van Hollen, D-Md., sponsor of the repeal resolution, said following Senate passage.
On the other side, Senate Banking Committee ranking Republican Pat Toomey of Pennsylvania said that repealing the rule would hurt consumers. “It would reduce access to credit for consumers, especially those who need it most, stifle innovation, and inhibit the functioning of our nation’s banks and credit markets,” he said.
Consumer advocates applauded the Senate action. “The bipartisan vote in the Senate shows the importance of repealing the OCC fake lender rule now because it is doing active harm right now, defending a predatory business model that destroys small businesses, homes, and lives,” said National Consumer Law Center Associate Director Lauren Saunders.