The National Community Reinvestment Coalition (NCRC) applauds the outcome of today’s bi-partisan 52-47 Senate vote on S.J. Res. 15, a resolution to reverse the Trump-era True Lender Rule. The rule, finalized in October 2020 by the Office of the Comptroller of the Currency (OCC), allows national banks to use their charters to help predatory lenders get around state laws that protect borrowers from exorbitant interest rates.
Forty-nine Democrats, joined by Republican Senators Marco Rubio (R-Florida), Susan Collins (R-Maine) and Cynthia Lummis (R-Wyoming), voted to roll back the rule and leave in place the abilities of states to protect their residents from predatory lending. NCRC urges the House to pass the companion resolution sponsored by Rep. Chuy Garcia (D-Illinois) and then to send the resolution on to President Biden for his signature.
In October, when the OCC finalized its True Lender rule, it sanctioned the ability of predatory lenders to evade state consumer protections by putting a bank name on the loan paperwork and claiming that the bank, not the predatory lender, issued the loan.
Under these arrangements, a nonbank buys back all or virtually all of the loan within days of its origination. The nonbank finds the customer, manages the website or the store where it is offered, explains the terms of the contract, and acts as the collector of the debt. It is unlikely that the borrower is aware of the involvement of the bank.
In Florida, where the interest rate on a two-year $2,000 loan is capped at 31%, four lenders use rent-a-bank partnerships to make loans with annual interest rates of 100% or more. Senator Rubio voted in favor of the resolution to overturn the rule.
In Maine, where interest rates on loans of similar size and duration are capped at 30%, two nonbanks use rent-a-bank partnerships to make loans with rates above 160%. Senator Collins voted in favor of S.J. Res. 15.
The resolution garnered widespread support from consumer advocates, academics and faith-based groups. The OCC rule went against the expressed wishes of 26 state attorneys general and of voters in states that have passed rate caps by wide margins.
NCRC had previously urged the new leadership at the OCC to drop its opposition to Congressional efforts to block the rule that allowed banks to issue triple-digit interest rate loans on behalf of payday lenders to help them evade state consumer protections. In late April, nearly 200 NCRC members met with Senators in 36 states to express their support for the resolution as part of NCRC’s annual Just Economy Conference.
NCRC would like to thank the resolution’s Senate sponsor Senator Chris Van Hollen (D-Maryland), and Senator Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee, for their leadership on this important issue.
Adam Rust is a senior policy advisor at NCRC.