The U.S. House passed a resolution to repeal the Trump administration’s True Lender Rule through the use of the Congressional Review Act.
The regulation allows lenders to go around state laws meant to curb interest rates on loans, opening up the opportunity for these non-bank predatory lenders to charge higher rates. With the House passage, it now goes to President Joe Biden to be signed into law.
The House passage was applauded by U.S. Sens. Chris Van Hollen (D-MD) and Sherrod Brown (D-OH), who first introduced the resolution to repeal the rule.
“For four years, the Trump Administration did all they could to strip Americans of their consumer protections. But today, Congress took major action to reverse that damage. Striking down the Trump ‘Rent-A-Bank’ rule will help prevent predatory lenders from ripping off consumers and charging loan-shark rates under deceptive terms. I have repeatedly vowed to use every tool at our disposal to reverse this, and today we’re one big step closer to delivering on that promise,” Van Hollen said.
For some background on the rule, most states have rules to protect consumers from predatory loan rates. However, banks chartered under federal law are exempt through the National Bank Act. The True Lender rule allows non-bank lenders to partner with these banks to skirt state laws and charge higher annual percentage rates. In these so-called “rent-a-bank” schemes, the bank attaches its name to the transaction while the customer deals entirely with the non-bank lender, who underwrites, arranges, and collects payments on the loan.
However, the Congressional Review Act offers a mechanism for Congress to repeal federal agency rules, which has happened in this case.
“The OCC, when it allowed banks to evade state interest rate caps, betrayed hard-working families and attacked states’ ability to protect their citizens from predatory loans,” Brown said. “Today, Congress showed the people we serve that we’re on their side. I look forward to President Biden signing this bill and overturning this rule that fleeced so many workers and enriched predatory lenders.”
The repeal is supported by various stakeholders and consumer protection groups, including a bipartisan group of 25 State Attorneys Generals, the Conference of State Bank Supervisors, the Faith for Just Lending Coalition, Center for Responsible Lending, National Consumer Law Center, Consumer Federation of America, the Military Officers Association of America, the Leadership Conference on Civil and Human Rights, the National Association of Consumer Advocates, the National Association of Federally-Insured Credit Unions, Appleseed Foundation, Consumer Action, National Community Reinvestment Coalition, UnidosUS, U.S. PIRG, and the Woodstock Institute.
“Predatory lenders trap working-class communities like mine in harmful cycles of debt. States like Illinois continue to pass laws to protect their residents from these debt traps, but the OCC’s True Lender rule gives bad actors a rubber stamp to undermine those laws,” Rep. Jesús García, who sponsored the House bill, said.