Senate Democrats attack “real lender” interest rate rule

Senate Democrats step up pressure on a federal banking regulator to remove a Trump-era rule they say allows lenders to evade state interest rate limits and deceive vulnerable consumers .

In a hearing Wednesday, Democrats on the Senate Banking Committee said it was high time the Office of the Comptroller of the Currency (OCC) revoked its “real lender” rule.

The OCC finalized a rule in October intended to clarify who is the real lender of a loan made to a client in a partnership between a nationally chartered bank and a third party, usually a non-bank lender. A coalition of attorneys general from the Democratic states sued the OCC in January, arguing the rule violated federal consumer protection laws and the authority of the OCC.

“You can side with online payday lenders who brag about their creativity by avoiding the law and finding new ways to prey on workers and their families,” Sen said. Sherrod BrownSherrod Campbell BrownSunday shows insight: bipartisan infrastructure talks drag on; Democrats move forward with Jan.6 White House inquiry into Cleveland Indians’ name change: “We certainly support their name change” Key Biden’s ally agrees to drop the transit of the PLUS infrastructure package (D-Ohio), chairman of the Senate Banking Committee, “or we can stand up for families and small businesses, as well as state attorneys general and state legislatures who have said ‘enough’.”

The rule was issued by former acting currency controller Brian Brooks, a Trump-appointed person who resigned shortly before President BidenJoe BidenHouse Republican calls second COVID-19 fight “much more difficult” Conflicting guidelines on school masks confuse Biden: path to citizenship in reconciliation package “remains to be seen” MORE to take place. But Biden has yet to appoint a full-time controller, allowing the rule to linger while interim controller Blake Paulson, a career OCC employee, oversees the agency.

In the absence of a person named by Biden who is likely to take control of the OCC soon, Democrats consider trying to repeal the real lender rule through a Congressional Review Act (CRA) resolution . The law allows the legislator to repeal regulations issued within a certain time frame and prohibit the agency from issuing a similar rule by passing a simple majority measure in each chamber.

Republicans, however, have made it clear that there will be little to no GOP support to repeal the real lender rule. They argued on Wednesday that the OCC measure would give banks and lenders clear legal guidelines that would help expand access to credit and warned Democrats against limiting those options.

“There is no doubt that we need to let everyone know their cheapest financing option. Count on me to do it, ”said the senator. Thom tillisThomas (Thom) Roland Tillis DACA tribunal ruling puts immigration reform weight on Democrats Senators hail ‘historic changes’ as competing proposals to tackle military sexual assault advance The bipartisan group says that he is still on the right track after the Senate setback MORE (RN.C.). “By removing this [rule] for today’s dads trying to get that short term loan to put food on the tables of six kids? Count me out of it.

The real lender is supposed to establish national guidelines for partnerships between banks and third parties that are subject to different state interest rate limits. Under the OCC rule, the true lender of the loan is the party that is either listed as the true lender or is financing the loan.

Such partnerships can allow a financial company to offer a client a loan with a higher interest rate than that allowed by the laws of its state by partnering with a federally chartered bank headquartered in a State with a higher interest rate cap.

“I don’t think of interest as a bad thing if I’m someone with bad credit and need a two-year personal loan to replace my roof or do one of the many things why people use these loans, ”Brooks told lawmakers Wednesday.

“I don’t think it’s on me to say that’s a bad thing.”

Democrats and a coalition of church and consumer groups have countered that the real lender rule will fuel the rise of “rent-a-bank” programs, where a lender only partners with a bank to issue a loan in order to escape interest rate caps, then terminate the partnership after taking possession of the loan. The OCC cracked down on bank leasing programs during the 2000s, but critics of the True Lender Rule say it will create more opportunities for them to thrive in a growing online lending landscape.

“While some of today’s programs may be a bit more sophisticated with the fintech aura than older programs, they still have the same escape from bank leasing,” said Lisa Stifler, director of policy at the State at the Center for Responsible Lending. .

“The loans that we see are always extremely expensive and extremely predatory. “

Democrats have lobbied for years to eliminate most high-cost, short-interest loans. The Consumer Financial Protection Bureau (CFPB) proposed a rule in 2017 that would effectively ban most “payday” loans, but the measure was flawed when a person appointed by Trump took over the office after the former resigned. director of the CFPB. Richard CordrayRichard Adams CordrayDennis Kucinich Joins Race To Be Mayor Of Cleveland Biden Administration Reverses Trump-Era Policy That Hindered Investigations Of Student Loan Companies On The Money: IRS To Begin Monthly Credit Payments tax for children July 15 | A quarter of Americans suffered financial blows in 2020: Fed MORE (D).

Democratic lawmakers have also called for setting a federal interest rate cap at 36%, but those measures are unlikely to reach a Senate at 50-50. And while some Republicans have supported tighter loan protections, the vast majority say such limits are “condescending” and inappropriate.

“Does the idea that we should deny people access to loans because they can’t be trusted to make a good decision for themselves, does that sound a little patronizing and patronizing to you? »Asked the senator Pat ToomeyPatrick (Pat) Joseph Toomey Black Women Seek To Build On Gains In Upcoming Election Watch Live: GOP Senators Introduce New Infrastructure Proposal Sasse Rebuilt By Nebraska Republican Party For Impeachment Vote MORE (Pa.), Republican ranking on the Senate Banking Committee.

Updated at 2:51 p.m.


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