Consumer and civil rights advocates at the OCC: your proposed “real lender” rule would contribute to fraud, Predatory lenders Bypass state interest rate laws that protect families
The timing of OCC embracing predatory lenders couldn’t be worse.
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OCC’s True Lender Rule Would Help Bypass State Interest Rate Laws
WASHINGTON DC – A proposal from the regulator of the country’s largest banks would allow predatory lenders to make a final turn State interest rate caps, exposing people to expensive loans with minimal consumer protection, according to a comment letter submitted today to the Office of the Comptroller of the Currency (OCC) by 13 national consumer and civil rights groups. Most of these groups also joined a shorter comment letter submitted today by more than 100 community organizations across the country.
The Center for Responsible Lending, National Consumer Law Center (on behalf of its low-income clients), Americans for Financial Reform Education Fund, Consumer Action, Consumer Federation of America, the Leadership Conference on Civil and Human Rights, NAACP, National Association of Consumer Advocates, the National Association of Latin American Community Asset Builders, the National Coalition for the Development of the Asian-Pacific American Community (National CAPACD), Public Citizen, UnidosUS and US PIRG strongly oppose the rule of the “real lender” of the OCC.
The proposed rule would facilitate fraudulent predators “rent a bank»Schemes in which a non-bank lender launders a loan with a bank (which is not subject to state rate caps) in order to charge interest rates in excess of what the the state authorizes.
The OCC proposal provides that a bank “makes” the loan and is therefore the lender – so national interest rate laws do not apply – as long as the name of the bank is on the loan agreement or that the bank is financing the loan. This rule would prohibit the courts from looking behind the fine print for the truth about who is managing the loan program and who is the “true lender”. The agency chief said he intended this rule to protect bank lease agreements litigation. Just days before the speech, the District of Columbia (DC) attorney general sued a high-rate bank lender, Elevate, for violating state rate caps; and California just launched an investigation into LoanMart, another bank rental lender. Currently, 45 states and DC have interest rates capped on at least some installment loans to protect residents from predatory high-cost loans.
Groups urge OCC to drop proposal
The groups urged the OCC to drop its proposal in its comment letter to the OCC:
“The proposal would remove state interest rate limits for predatory non-bank lenders in all states as long as a bank’s name is in the fine print – nothing more – taking us back to the days of the early years.” 2000, when payday lenders used bank rental schemes to evade state laws. States would lose the power they have had since the days of the American Revolution to limit interest rates to prevent predatory lending. …
“The OCC asks us to believe it will not allow predatory lending. But when the OCC goes out of its way to support a predatory small business lender’s right to charge 120% APR and does nothing to prevent a payday lender from using an OCC-regulated bank to launder installment loans at 179%, a naive trust does not override government interest rate limits. …
“The timing of the BCC embracing predatory lenders couldn’t be worse. We are in the midst of an unprecedented health crisis and a serious economic crisis…. We are, at the same time, at a pivotal moment in the calculation of our nation with its history of structural racism.… [I]It’s hard to imagine a more inappropriate time to disrupt long-standing guarantees in place since the founding of this country that have played a fundamental role in protecting consumers from predatory financial practices.