Washington D.C.- California Attorney General Xavier Becerra, Illinois Attorney General Kwame Raoul, and New York Attorney General Letitia James have sued the Office of the Comptroller of the Currency (OCC), challenging the validity of the OCC’s final rule that encourages non-bank lenders to launder loans through banks so they can charge triple-digit interest rates and evade state rate caps.
“The OCC rule is an attack on state interest rate caps, like those enacted by California and New York,” said Rachel Weintraub, Legislative Director and General Counsel with the Consumer Federation of America. “In the absence of a federal usury law, consumers rely on their state governments to shield them from abusive interest rates. We commend these Attorneys General for challenging the legality of this rule and stepping in to uphold their states’ authority to protect residents with usury laws.”
“State governments see firsthand that predatory lenders target the financially distressed and communities of color, stripping them of hard-earned wealth and trapping them in devastating cycles of debt,” said Rachel Gittleman, Financial Services Outreach Manager with the Consumer Federation of America. “State interest rate caps have proven to be the most effective way to protect consumers from unaffordable loans. We applaud the Attorneys General for standing up to this attempt to bypass state interest rates and embolden predatory lenders in the midst of a financial crisis.”
The Attorneys General state that the OCC rule will worsen the problem of rent-a-bank schemes, which occur when a predatory lender launders loans through a federally regulated bank to evade state interest rate caps. The Attorneys General argue that the rule violates the Administrative Procedure Act and is “beyond the OCC’s power to issue.”
“In the glaring absence of regulation and enforcement, the role of protecting consumers from predatory lenders falls to states. California, New York, and Illinois Attorneys General took an important step to stand up to the anti-consumer OCC rule,” continued Gittleman.