NCL joins advocates in applauding Senate for repealing the national banking regulator’s predatory lending rule, urging the House to act soon

Washington, DC—The National Consumers League (NCL) applauds the Senate for voting to overturn the OCC’s “fake lender” rule, which allows predatory lenders to evade state interest rate laws by putting a bank’s name on the paperwork. In a 52 – 47 bipartisan vote this week, the U.S. Senate voted to approve S.J. 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). Rep. “Chuy” García introduced a parallel resolution, H.J. Res. 35, in the U.S. House of Representatives. Now that the Senate has approved the resolution, the House needs to take swift action to stop the ongoing harm.

“We applaud this bipartisan rejection of rent-a-bank schemes,” said Sarah Robinson, NCL’s Public Policy Manager. “As consumers and small businesses look to rebuild from the devastation of the coronavirus pandemic, they must be protected from predatory lending. We now urge the House to move with urgency to prevent this rule from continuing to do harm.”

NCL was part of a broad coalition of more than 375 organizations representing all 50 states and the District of Columbia calling on Congress to overturn the “fake lender” rule, which threatens to harm consumers nationwide.

The rushed “fake lender” rule took effect in December and was issued by the Office of the Comptroller of the Currency (OCC). The rule protects “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 overrides 200 years’ worth of case law allowing courts to see through usury law evasions to the truth and replaces it with a pro-evasion rule that looks only at the fine print on the loan agreement. Predatory lenders charging 100 percent to 200 percent APR are already starting to push high-cost installment loans across the country that exceed the rates permitted under states’ laws.

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, and many other groups also support Congress overturning the rule.

According to national polling, two-thirds of voters (66 percent) are concerned about the ability of high-cost lenders to arrange loans through banks at rates higher than the state laws allowed.

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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.