Biden signs repeal of OCC’s “real lender” rule


WASHINGTON – President Biden has approved Congress repealing a regulation designed to facilitate partnerships between national banks and fintech lenders, a significant victory for consumer advocates and state banking authorities.

On Wednesday night, Biden passed a Congressional Review Act resolution that overturned an Office of the Comptroller of the Currency regulation known as the “real lender” rule. The resolution had slight bipartisan support in the House and Senate, with three Republican senators and one House member voting with their fellow Democrats.

The now defunct OCC rule introduced a simple test that examiners would use to determine the so-called true lender in bank-non-bank partnerships; if a national bank had funded the loan or had been named as the lender in an agreement, the bank would have been considered the true lender.

President Biden, center, signs Congressional Review Bills in the Eisenhower Executive Office building in Washington on Wednesday, including one that overturns the OCC’s “real lender” rule. “In many states… some loan sharks and online lenders have figured out how to get around [interest rate caps] using a partnership with a bank to avoid the state cap and charging outrageous interest, ”Biden said.


If a national bank were named as the true lender in a fintech partnership, it would have been responsible for ensuring a loan’s compliance with federal law, and a state’s interest rate caps would not have applied to loan products. Many consumer groups had criticized the rule, saying such a test would have made it too simple for some predatory lenders to quickly expand their operations across the United States.

Before signing the resolution, the president said the measure would help regulators crack down on so-called bank leasing programs.

“In many states, these lenders are controlled by caps on the amount of interest they can charge, but some loan sharks and online lenders have figured out how to get around those limits – using a partnership with a bank to avoid the cap. the state. and charge outrageous interest, ”Biden said.

“And I have to confess that I didn’t know that. I didn’t know they could pull this off, ”Biden added.

After the House followed the Senate and voted to repeal the rule last week, Acting Comptroller Michael Hsu said in a statement that “the OCC will consider policy options, consistent with the Congressional Review Act, that protect consumers while expanding financial inclusion “.


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