Senate Democrats target ‘real lender’ interest rate rule
Senate Democrats are stepping up pressure on a federal banking regulator to repeal a Trump-era rule they say allows lenders to evade state interest rate limits and defraud creditors. vulnerable consumers.
In a hearing Wednesday, Democrats on the Senate Banking Committee said it was high time the Office of the Comptroller of the Currency (OCC) revoked its “real lender” rule.
In October, the OCC finalized a rule to clarify who is the real lender of a loan given to a client in a partnership between a nationally chartered bank and a third party, usually a non-bank lender. A coalition of attorneys general from the Democratic states sued the OCC in January, arguing the rule violated federal consumer protection laws and the authority of the OCC.
“You can stand on the side of online payday lenders who brag about their creativity by avoiding the law and finding new ways to prey on workers and their families,” Sen said. Sherrod brownSherrod Campbell BrownOn The Money: Consumer income and spending exploded in March | Harris and Senators work behind the scenes on a job package | Biden cancels construction of border wall The Hill’s Morning Report – Biden launches blitz for jobs with ‘thank you, Georgia’ Harris, senators working behind the scenes on MORE jobs package (D-Ohio), chairman of the Senate Banking Committee, “or we can stand up for families and small businesses, as well as attorneys general and state legislatures that have said ‘enough’.”
The rule was issued by former interim currency controller Brian Brooks, a man named Trump who resigned shortly before. President BidenJoe Biden Fires, smoke, floods, droughts, storms, heat: America needs a climate resilience strategy Senator Susan Collins pushes corporate tax rate by 28%, says jobs will be lost The advisor Biden Economic Defines Infrastructure Plan as a Necessary Investment READ MORE to take place. But Biden has yet to appoint a full-time controller, allowing the rule to persist while interim controller Blake Paulson, a career OCC employee, oversees the agency.
With no Biden nominee who could take over the OCC soon, Democrats are considering trying to repeal the real lender rule through a Congressional Review Act (CRA) resolution. The law allows lawmakers to repeal published regulations within a certain period of time and prohibit the agency from issuing a similar rule by passing a measure with simple majorities in each chamber.
Republicans, however, have made it clear that there will be little to no GOP support to repeal the real lender rule. They argued on Wednesday that the OCC measure would give banks and lenders clear legal guidelines that would help expand access to credit and warned Democrats against limiting those options.
“There is no doubt that we need to let everyone know their cheapest financing option. Count on me to do this, ”said the senator. Thom tillisThomas (Thom) Roland Tillis Senate hears high-profile judicial nominees from Biden for the first time Senate Democrats target ‘real lender’ interest rate rule Former North Carolina Chief Justice North launches Senate campaign READ MORE (RN.C.). “By removing this [rule] for today’s dads trying to get that short term loan to put food on the table for six kids? Count me on that.
The real lender is supposed to establish national guidelines for partnerships between banks and third parties that are subject to different state interest rate limits. Under the OCC rule, the real lender of the loan is the party that is listed as the real lender or is funding the loan.
Such partnerships can allow a financial company to offer a client a loan with a higher interest rate than that allowed by the laws of their state by partnering with a federally chartered bank headquartered in a State with a higher interest rate cap.
“I don’t consider interest a bad thing if I’m someone with dings on my credit and need a two-year personal loan to replace my roof or do one of the many things why people are using these loans, ”Brooks told lawmakers Wednesday.
“I don’t think it’s on me to say that’s a bad thing.”
Democrats and a coalition of consumer and faith-based groups have countered that the real lender rule will fuel the rise of “lease-to-bank” systems, where a lender only partners with a bank to issue a loan in order to bypass the interest rate caps and then breaks the company after taking possession of the loan. The OCC cracked down on bank leasing systems throughout the 2000s, but critics of the true lender rule say it will create more opportunities for them to thrive in a growing online lending landscape.
“While some of the current projects may be dressed a bit more sophisticated with the aura of fintech than older systems, they still have the same escape from leasing from a bank,” said Lisa Stifler, director of the state policy at the Center for Responsible Lending.
“The loans that we see are always extremely expensive and extremely predatory.”
Democrats have been pushing for years to eliminate most expensive, short-interest loans. The Consumer Financial Protection Bureau (CFPB) proposed a rule in 2017 that would effectively ban most payday loans, but the measure was overturned when a person appointed by Trump took over the office after the resignation of the former director of CFPB. Richard CordrayRichard Adams Cordray Senate Democrats aim for ‘real lender’ interest rate rule Will Biden CFPB crack down on innovation and regulatory sandboxes? Biden’s Choices for Financial Agencies Provide Snapshot of Regulatory Agenda LEARN MORE (RE).
Democratic lawmakers have also called for setting a federal interest rate cap at 36%, but those measures are unlikely to go through a 50-50 Senate. And while some Republicans have supported stronger loan protections, the vast majority say these limits are “condescending” and inappropriate.
“Does the idea that we should deny people access to loans because they can’t be trusted to make a good decision on their own, sound a little patronizing and patronizing to you?” asked the senator. Pat ToomeyPatrick (Pat) Joseph Toomey Sasse reprimanded by Nebraska Republican Party over impeachment vote Philly GOP commissioner on censorship: “ I would suggest they censor Republican elected officials who lie ” Toomey censored by several county GOP committees of Pennsylvania on impeachment vote MORE (Pa.), Republican rank on the Senate Banking Committee.
Updated at 2:51 p.m.