June 29, 2021
Washington, DC—The National Consumers League (NCL) applauds the House for voting for the Congressional Review Act resolution to overturn the OCC’s “fake lender” rule, which allowed predatory lenders to evade state interest rate laws by putting a bank’s name on the paperwork. In a 218-208 bipartisan vote, The U.S. House of Representatives voted to approve SJ Res 15, a resolution under the Congressional Review Act (CRA), which was introduced by Senators Chris Van Hollen (D-MD) and Sherrod Brown (D-OH). A companion resolution was introduced by Rep. “Chuy” García (D-IL). Now that both chambers of Congress have approved this resolution, we look forward to President Biden signing the bill into law.
“We applaud the House’s bipartisan vote to repeal this harmful rule which facilitates rent-a-bank schemes,” said NCL’s Public Policy Manager Sarah Robinson. “This is an important step in preventing predatory lenders from targeting vulnerable communities. We urge President Biden to quickly sign this bill into law to protect consumers.”
NCL was part of a broad coalition of more than 400 organizations representing all 50 states and the District of Columbia calling on Congress to overturn the “fake lender” rule, which threatens to “unleash predatory lending in all fifty states.”
The rushed “fake lender” rule took effect in December and was issued by the Office of the Comptroller of the Currency (OCC). The rule protected “rent-a-bank” schemes whereby predatory lenders (the true lender) launder their loans through a few rogue banks (the fake lender), which are exempt from state interest rate caps. The rule had overridden 200 years’ worth of case law allowing courts to see through usury law evasions to the truth, and replaced it with a pro-evasion rule that looked only at the fine print on the loan agreement.
A broad, bipartisan cross-section of experts and officials have called on Congress to repeal the fake lender rule. They include a bipartisan group of 25 state attorneys general, concerned the rule would effectively gut their state usury laws. The Conference of State Bank Supervisors, National Association of Consumer Credit Administrators, National Association of Federally-Insured Credit Unions, Credit Union National Association, Military Officers Association of America, Faith for Just Lending, and many other groups also support Congress overturning the rule.
According to national polling, two-thirds of voters (66%) are concerned about the ability of high-cost lenders to arrange loans through banks at rates higher than the state laws allow.
This victory will stop predatory lenders from charging 100% to 200% APR and make all lenders adhere to state laws.
NCL now urges the Congress to take up the Veterans and Consumers Fair Credit Actand cap interest rates nationally on all consumer loans, including payday and car title loans. It is crucial that the Congress take up this bill that was introduced by Rep. Garcíaand Rep. Glenn Grothman in the last Congress. This is a critical piece of legislation that will protect all consumers from predatory lending. We look forward to working with Congress and our state delegation to pass this important piece of legislation.
About the National Consumers League
The National Consumers League, founded in 1899, is America’s pioneer consumer organization. Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. For more information, visit www.nclnet.org.