In October 2020, the Office of the Comptroller of the Currency, one of the federal agencies that regulates banks, issued a rule that determines what national bank or federal savings association is considered the “true lender” in circumstances where a bank and a third party have a role in the loan. Many consumer advocates expressed concern that the rule would allow lenders to evade these state usury laws, which cap interest rates.
Payday loans are subject to state usury laws. Federal bank loans generally are not. Therefore, predatory lenders have sometimes tried to evade the usury laws by working with a bank: putting the bank’s name on the loan document and then “buying back” the loan. The lender then claims that it is just a “servicer” for a bank loan that is exempt from state interest rate caps.
On March 25, 2021, Senate Banking Committee Chairman Sherrod Brown and Sen. Chris Van Hollen introduced a Congressional Review Act resolution to rescind the rule. The National Consumer Law Center, which strongly supports the CRA resolution, has written that the OCC rule protects predatory lenders at the expense of consumers and “helps triple-digit interest rate loans evade state and voter-approved interest rate caps.”
Now, 25 state attorneys general have written a letter urging Congress to use the CRA resolution to rescind the OCC rule. The letter is here.
Under the CRA, Congress has until mid-May to pass the resolution, which is not subject to filibuster.