House follows Senate in rejecting OCC’s ‘true lender’ rule
WASHINGTON — The House voted Thursday to dismantle a Trump-era rule that sought to make it easier for domestic banks to make and sell loans through fintech partnerships.
Following the Senate’s lead since early May, the House voted 218 to 208 to strike down an Office of the Comptroller of the Currency regulation known as the “true lender” rule using the Congressional Review Act. The measure is now going to President Biden’s office, and he should sign it.
As in the Senate, the Congressional Review Act vote to overturn the OCC rule was bipartisan, albeit barely: One Republican House member voted with Democrats to overturn the regulation.
The rule, finalized in October by former acting comptroller Brian Brooks and in effect since December, introduced a simple test to determine who is the “true lender” in bank and non-bank partnerships; if a bank funds the loan or is named as the lender in an agreement, the rule would be that the bank would be considered the true lender.
When a national bank is deemed the true lender, the loan qualifies for federal protections such as pre-emption of state interest rate caps. While many in the banking sector supported the rule and praised its simplicity, consumer protection advocates argued the test would make it too easy for predatory lenders to export expensive loans to states with strict usury laws using the powers of national banks .
“This ‘bogus lender’ rule gives the green light to bank leasing schemes in which predatory lenders circumvent bank interest rate limits to defraud vulnerable consumers,” House Speaker Nancy Pelosi said. D-California, during a debate on the floor before the vote. “This is done by putting the name of the bank on the loan documents and claiming that the bank, not the predatory lender, issued the loan.”
In a statement released in response to the vote, Acting Comptroller of the Currency Michael Hsu said in the OCC “will consider policy options, consistent with the Congressional Review Act, that protect consumers while expanding the financial inclusion”.
“Both of these priorities are part of the agency’s mission to ensure that national banks and federal savings associations provide equitable access to financial services for all Americans and that customers are treated fairly,” said Hsu.
Republicans, led by Rep. Patrick McHenry of North Carolina, a senior member of the House Financial Services Committee, argued ahead of the vote that rejecting the OCC rule would sow confusion and limit access for credit consumers.
“Let’s call it what it is: it’s the blue states and their left wing, the so-called advocates of consumer protection, who again want to limit the reach of national banks and partnerships under the guise of consumer protection in quotes,” McHenry said at a news conference. the debate on the floor.
Republican representatives opposing the CRA challenge frequently cited the need to maintain access to credit among communities of color, saying fintech companies were more likely to serve these populations.
“Fintech has been instrumental in expanding access to credit for consumers who have little or no credit history,” said Rep. Barry Loudermilk, R-Ga. “This resolution is devastating for minority consumers and businesses, as well as those with subprime credit and the unbanked. Instead of giving these people options, this resolution would direct them to payday lenders or, in states like Georgia where payday loans are illegal, they will not have access to credit.
Some Democrats have greeted those concerns with skepticism.
“I am absolutely overwhelmed by the great interest my fellow Republicans have in helping minorities,” House Financial Services Committee Chair Maxine Waters, D-Calif., said during the indoor debate. “But I don’t think it’s about taking care of minorities and these small businesses. It’s about protecting the big banks. It’s about protecting the national banks.