OCC’s new True Lender rule opens the door to more abusive lending

The rule prevents states from enforcing laws against predatory high-cost lending

In a final rule issued Tuesday, the Office of the Comptroller of the Currency sanctioned high-cost lending arrangements between state-licensed non-banks and national banks. As a result, payday lenders and others charging triple-digit interest rates will be able to conduct business in states where high-cost lending is prohibited by state law.

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

“The true lender rule is another strike by a rogue regulator to undermine the interests of consumers. With only days until an election, the OCC pushed through a new rule that undermines enforcement of state interest rate caps. Now, state Attorneys General will have a harder time protecting people targeted by high-cost lenders. The OCC wants to take authority away from state Attorneys General, solely for the purpose of applying its own weak standard instead. This is a win and federal green light for predatory, high-cost lenders and a shameful loss for consumers. 

“The OCC has already pushed through harmful changes to the Community Reinvestment Act, a critical anti-discrimination law. Now it’s legitimized a way for national banks to launder high-interest loans arranged by other companies. Consumers, businesses and communities need safe and sound lending, and they certainly don’t need the federal government inventing a way to help unscrupulous lenders get around state interest rate caps.” 


The purpose of the OCC’s “true lender” rule is to sanction high-cost lending arrangements between state-licensed non-banks and national banks. Under the new rule, payday lenders and others charging triple-digit interest rates will be able to conduct business in states where it was previously impermissible by state law.

Under the OCC’s terms, a bank is deemed to be the lender if on the date of origination a bank is either named as the lender in the loan agreement or if it funds the loan.

In September, NCRC filed a comment against the true lender rule signed by 87 organizations, including the NAACP, Color of Change, UNIDOS and Consumer Action. 

Currently, several high-cost lenders partner with a handful of banks to make loans in states where they would otherwise be illegal were it not for preemption, a privilege that allows national banks to use the interest rate laws of their home state wherever they do business. These arrangements permit evasive partnerships.

The OCC’s true lender rule blesses these “rent-a-charter” arrangements, even if the relationship between the bank and the high-cost lender is temporary and illusory. For example, it is common for banks to sell all or most of a loan back to the high-cost lender in a matter of days. From the borrower’s perspective, the bank is a silent actor, as all of the primary aspects of borrowing money occur through the high-cost lender. It is the high-cost lender that markets the product, accepts the loan application on its website, develops the underwriting algorithms, and collects repayments.

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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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