The National Association of Federally (NAFCU) Insured Credit Unions is expressing concerns regarding the Office of the Comptroller of the Currency’s (OCC) true lender rule.
The NAFCU said the guidance allows banks and federal savings and loan companies to provide their charter to online lenders to deliver high-cost loans with annual rates over 100 percent while evading state consumer protections and usury caps – promoting predatory payday lending.
Before the Senate Banking Committee’s recent hearing on rent-a-bank schemes in which lawmakers discussed methods of preventing predatory lending practices and ensuring low-income, underserved communities have access to affordable financial services –
NAFCU wrote to the committee to flag concerns.
The issues raised, per officials, were companies taking advantage of regulatory loopholes and chartering efforts to expand reach in the financial system, potentially creating risks for consumers and the financial system.
“Payday lenders are operating on an uneven playing field, relying upon the benefits of the OCC’s federal preemption to circumvent consumer protections and place borrowers in harm’s way,” the NAFCU noted.
The NAFCU said it is leading efforts to alert policymakers and consumers to the growing issue of financial technology companies applying to become a bank or acquiring a bank, enabling fintech companies to evade proper oversight in the financial system.