The Conference of State Bank Supervisors (CSBS) has endorsed a Senate resolution to strike down the Office of the Comptroller of the Currency’s (OCC) true lender rule.
CSBS officials sent a letter to Sen. Sherrod Brown (D-OH), chair of the Senate Banking Committee, and Sen. Pat Toomey (R-PA), ranking member on the committee, expressing the organization’s support for the joint resolution, S.J. Res. 15.
“The true lender rule undercuts state consumer protection laws by extending national bank preemption to third-party nonbanks. The rule enables otherwise illegal interest rates on loans in which a nonbank holds the predominant economic interest by asserting that its national bank partner is the true lender merely because the bank’s name was on the loan,” CSBS President and CEO John Ryan said.
The True Lender rule was put in place by the Trump Administration. It specifies that a bank is the true lender if, as of the date of origination, it is named as the lender in the loan agreement or funds the loan. Also, if one bank is named the lender in the loan agreement for a loan and another bank funds that loan, the bank named as the lender in the loan agreement makes the loan.
“The OCC’s true lender test is so formalistic that it permits nonbanks to effectively lend at otherwise usurious interest rates and completely disregards the long-standing role of states to determine the interest charged to their citizens by nonbank lenders,” Ryan added.
CSBS is the national organization of bank regulators from all 50 states, American Samoa, District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands