NCRC Dismayed by OCC’s Intention to Establish a True Lender Standard

Proposal paves way for more high-cost lending, undermines state restrictions

Today, the Office of the Comptroller of the Currency (OCC) announced a proposed rule on the true lender doctrine. Under the proposal, a bank is considered to be the “true lender” if it is named as the lender or if it funds the loan. 

Jesse Van Tol, CEO of the National Community Reinvestment Coalition, made the following statement: 

“This rule from the OCC will protect banks, undermine states and make consumers more vulnerable to exorbitant interest rates. The proposed rule would take away from states the longstanding right to impose interest caps inside their borders, a privilege given to states for over two hundred years. 

“It is very concerning that at a time when many people are struggling to make ends meet, when the nation’s pandemic economy is in tatters, and millions are out of work, the Trump Administration would rush forward on a proposal that favors more high-cost lending.

“Bank charters aren’t meant to be a way to immunize payday lenders from state attorneys general. The OCC’s approach rubber-stamps evasion of state laws.

“States’ attorneys general have used the true lender doctrine to protect their residents from the dangers of high-cost loans, arguing that such relationships are merely a ruse that enables a bank to ‘rent’ its charter to non-bank lenders in exchange for compensation. 

“In a typical rent-a-charter partnership, while a bank funds a loan and has its name on the loan contract, it does none of the marketing, does not interact with the consumer, and ceases to have any relationship to the customer or the loan after only a few days. Typically, a bank sells all or almost all of the loan back to its non-bank partner within a few days of issuing the loan, and indeed, with the exception of the borrowers who read the fine print on the loan contract, few people will ever understand that a bank was involved in the transaction at all. The bank usually takes a fee of one or two percentage points, while its non-bank partner receives the majority of the economic return on the loan.

“The truth is that states are making good use of the true lender doctrine on their own, and any intervention by the OCC only reflects an effort to use pre-emption power to overcome the ability of states to enforce their own laws. 

“It is perplexing how the OCC could see this proposal as a means to ensure that consumers will have access to affordable credit when the evidence on the ground is that the evasive partnerships it facilitates are being used to make loans with interest rates of more than 100%.”. 

For more on rent-a-banks, see:

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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