Days before crucial deadline, NCL joins 300+ groups call for Congress to rescind ‘Fake Lender’ rule that facilitates predatory loan schemes

Washington, DC—With just a few days left before a crucial deadline, the National Consumers League (NCL) joined a broad coalition of 324 organizations from all 50 states and the District of Columbia calling for Congress to eliminate a Trump-era regulation that took effect in December and could “unleash predatory lending in all 50 states.” The rushed “fake lender” rule, which was issued by the Office of the Comptroller of the Currency (OCC), would facilitate “rent-a-bank” schemes whereby predatory lenders launder their loans through a few rogue banks, which are exempt from state interest rate caps, through a superficial partnership meant to evade critical predatory lending rules. Linked here and included at bottom is the coalition’s letter to Congress.

“States across the country have passed laws to protect their citizens from predatory lending. This harmful rule undoes that progress,” said Sarah Robinson, Public Policy Manager at the National Consumers League.  “We call on Congress to protect consumers from these types of predatory loans that target vulnerable communities and seek to trap borrowers in a cycle of debt.”

As was done more than a dozen times under President Trump, this Congress could use the Congressional Review Act (CRA) to rescind recently finalized regulations, including the OCC’s “fake lender” rule, with just a majority vote in both chambers, limited debate, no filibuster, and the president’s signature. However, to be considered, there is a strict deadline for CRA resolutions to be introduced, estimated to be April 4. With spring recess coming up, the practical deadline is likely the end of this week. A CRA of the OCC “fake lender” rule has not yet been introduced. These resolutions also must be voted upon by a certain date, currently estimated for sometime between May 10 and May 21.

The coalition of signatories to the letter consists of 325 groups, including civil rights, community, consumer, faith, housing, labor, legal services, senior rights, small business, student lending, and veterans organizations representing all 50 states and the District of Columbia. The letter states that “[t]he rule replaces the longstanding ‘true lender’ anti-evasion doctrine with a ‘fake lender’ rule that allows lenders charging rates of 179 percent or higher to evade state and voter-approved interest rate caps merely by putting a bank’s name on the paperwork – just as payday lenders were doing in the early 2000s.”

The groups warn, “These lenders charge triple-digit interest rates, target the financially vulnerable and communities of color, and trap consumers in devastating cycles of debt…. Currently, there are only a few of these rogue, predatory lenders, but they will spread to all 50 states if the OCC rule is not overturned.”

A 2-pager explanation of the “fake lender” rule is here.