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June 30, 2021
Law rescinds rule allowing predatory lenders to circumvent borrower protection laws and charge consumers outrageous interest rates
Today, U.S. Senator Chris Van Hollen (D-Md.), A member of the U.S. Senate Committee on Banking, Housing and Urban Affairs, and committee chair Sherrod Brown (D-Ohio) applauded the signing by President Biden of their resolution to repeal the Trump administration’s so-called real lender rule through the Congressional Review Act. This regulation, finalized in the last few months of the previous administration, allows predatory lenders to circumvent state laws aimed at lowering interest rates on loans and opens the door for these lenders to prey on vulnerable consumers. . According to the Center for Responsible Lending, this rule has allowed predatory lenders to grant loans at 100% APR or more in states with limits of 36% or less by laundering the loans through a non-foreign bank. subject to state limits.
“Americans deserve consumer protections that work for them – not for vested interests and predatory payday lenders. Today’s action to repeal Trump’s “Rent-A-Bank” rule will help prevent predatory lenders from scamming consumers and charging deceptively low borrowing rates. I have vowed to use all the tools at our disposal to undo the damage done by the Trump administration by instituting this rule. Today, we have kept this promise â€, said Senator Van Hollen, a member of the US Senate Committee on Banking, Housing and Urban Affairs.
“Today we showed the American people that we are on their side”, said Senator Brown, chairman of the US Senate Committee on Banking, Housing and Urban Affairs. “This Trump administration rule that allowed predatory lenders to line their pockets on the backs of working families has been overturned. I applaud the Biden administration and my colleagues in the House and Senate for coming together to crack down on predatory lenders. “
The legislation has been supported by a wide range of stakeholder and consumer groups including: a bipartisan group of 25 state attorneys general, the Conference of State Bank Supervisors, the Faith for Just Lending Coalition, the Center for Responsible Lending, the National Consumer Law Center (on behalf of its low-income clients), the Consumer Federation of America, the Military Officers Association of America, the Leadership Conference on Civil and Human Rights, the National Association of Consumer Advocates , the National Association of Federally-Insured Credit Unions, Appleseed Foundation, Consumer Action, National Community Reinvestment Coalition, UnidosUS, US PIRG and the Woodstock Institute.
The legislation was led by Congressman Jesús “Chuy†GarcÃa in the House and was co-sponsored in the Senate by Senator Jack Reed (D-RI), Senator Elizabeth Warren (D-MA), Senator Catherine Cortez Masto (D-NV), the senator. Tina Smith (D-MN), Senator Dianne Feinstein (D-CA), Senator Richard Durbin (D-IL), Senator Sheldon Whitehouse (D-RI) and Senator Jeff Merkley (D-OR).
Background
Most states and the District of Columbia have rules in place to protect consumers from predatory lending rates, but federally licensed banks are exempt by the National Bank Act. The Office of the Comptroller of the Currency (OCC) rule allows non-bank lenders to use shallow and deceptive partnerships with these banks to circumvent state laws and charge outrageous annual percentage rates that have reached 179%. In these “rent-a-bank” systems, the bank attaches its name to the transaction while the customer deals entirely with the non-bank lender, who markets, underwrites, arranges and collects payments on the loan.
The Congressional Review Act provides Congress with a mechanism to repeal federal agency rules. Agencies submit their rules to Congress, and Congress can pass a joint disapproval resolution to overturn the action on a fast-track basis. Signing this resolution into law overturns OCC’s so-called true lender rule and ensures that consumers are protected against predatory “rent-a-bank” schemes.
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