The Office of the Comptroller of the Currency has issued a proposed rule that would make it easier for payday lenders to dodge interest rates and consumer protection laws. Better Markets says it’s bad policy and bad rulemaking.
The OCC says its proposed rule would define when a bank can be considered the true lender in a loan transaction. However, as we point out in our comment letter, the OCC hasn’t produced any evidence that the current legal framework has had any adverse impact on the ability of banks to lend and that its failure to justify its change in policy … renders the proposal arbitrary and capricious. In fact, the proposed rule would enable predatory lenders to more easily evade state consumer protections with the help of a national bank.
Bottom line: It’s bad policy because it will facilitate the “rent-a-bank” model where nonbanks essentially rent a national bank’s name to fend off state consumer protection laws that would otherwise apply, and it’s bad rulemaking because the OCC failed to justify its proposal and failed to account for the harm it will inflict on countless consumers who won’t be getting the legal protections that they deserve under their state laws.
The agency should rescind this misguided rulemaking and revisit the true lender doctrine only if and when it can present data and analysis that proves its approach will enhance the safety and soundness of the financial system and benefit the American people.