Washington, D.C. – Stephen W. Hall, Legal Director and Securities Specialist for Better Markets, issued the following statement after Better Markets filed its comment letter on the so-called “true lender” proposal issued by the Office of the Comptroller of the Currency (“OCC”):
September 3, 2020
The OCC’s Latest Assault on Consumer Protection Under State Law Should Be Abandoned
FOR IMMEDIATE RELEASE
Thursday, September 3, 2020
Contact: Pamela Russell at 202-618-6433 or firstname.lastname@example.org
“In its latest rule proposal, the OCC is once again paving the way for nonbank firms, like payday lenders, to slap a national bank label on their loans and enjoy immunity from state consumer protection laws adopted to protect vulnerable Americans from predatory and abusive practices, including sky-high interest rates.
“The OCC’s latest proposal would establish an expansive, bright-line test providing that a national bank is the “true lender,” and preemption will attach, as long as its name appears in the loan documents or it funds the loan. The rule will apply even where a nonbank partner of the national bank does all the real lending work by creating the marketing and application materials, setting the loan terms, approving or rejecting the applicants, advancing money to fund loans, and immediately buying them from the national bank once they are issued.
“It’s bad policy because it will facilitate the burgeoning “rent-a-bank” model where nonbanks essentially rent a national bank’s name to fend off state consumer protection laws that would otherwise apply. It also reverses 20 years of the OCC’s own policy disapproving the rent-a-bank model. It’s also 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 they deserve under their state laws. And while the OCC claims the rule will provide “certainty” to the markets and access to “affordable” loans, these claims carry little weight. In reality, the rule will simply give predatory lenders precisely the type of “certainty” they need to victimize consumers with impunity under state law.
“And the notion that expanding the shield of preemption for the benefit of payday lenders and other predatory firms will promote access to “affordable credit” is especially weak, since those lenders gouge consumers with sky-high interest rates and often trap consumers in cycles of unaffordable debt. The OCC should withdraw its proposal, which is another step in the march toward de-regulation in the financial markets—all without a credible justification and at the expense of countless American consumers.”
Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.com.