Payday/High-cost Loans

President Signs Legislation to Repeal Banking Regulator’s Predatory “Fake Lender” Rule

Important Resolution Rescinds Rule that Allows Triple-Digit Interest Rate Loans Across the Country

Washington, D.C. –  Last night, President Biden signed a resolution into law that repeals the OCC’s “fake lender” rule, which allows predatory lenders to evade state interest rate laws by putting a bank’s name on the paperwork. S.J. Res. 15, a resolution under the Congressional Review Act (CRA), was introduced by Senators Chris Van Hollen (MD) and Sherrod Brown (OH), and a parallel resolution, H.J. Res. 35, was introduced by Congressman Jesús “Chuy” García in the U.S. House of Representatives. The President’s signature follows bipartisan votes to approve the resolution in both the House of Representatives and the Senate. Advocates applauded President Biden for signing the resolution, helping to prevent a massive expansion of predatory lending in all 50 states.

“We thank President Biden for his leadership in protecting small business owners, veterans, and consumers, still reeling from the fallout of the COVID-19 pandemic,” said Rachel Gittleman, Financial Services Outreach Manager with Consumer Federation of America. “President Biden’s signature and the bipartisan votes in both the House and Senate illustrate the widespread disapproval of the harmful rent-a-bank model that is being used by predatory payday and installment lenders to make triple-digit interest rate loans that are illegal across the country.”

Predatory small business lenders are using the fake lender rule today to defend a 268% APR rate on loans totaling $67,000 to a restaurant owner in New York, where the criminal usury rate is 25%, secured by property in New Jersey, where the legal limit is 30%. OppLoans (aka OppFi), an online lender offering 160% APR loans in 26 states that prohibit triple-digit rate loans, cited the OCC’s fake lender rule in defense of its loan to a disabled veteran in California, where the legal rate on the loan is 24%. OppLoans is evading state rate cap laws supported by broad majorities of voters in Arizona, Montana, Nebraska, and South Dakota; and also laws approved by legislatures in Maine, Ohio, and other states.

“Overturning the fake lender rule is an important first step to protect small businesses and families devastated by COVID from predatory lending, especially in communities of color,” Gittleman continued. “Our federal financial regulators must revisit additional rules that pave the way for usury law evasions and use their supervisory and enforcement authority to crack down on rent-a-bank lending throughout the country. In addition, Congress must pass the Veterans and Consumers Fair Credit Act, to permanently cap interest rates at 36% for all consumers,” she concluded.

broad, bipartisan cross-section of experts and officials called on Congress to repeal the fake lender rule. They include a bipartisan group of 25 state attorneys general, who are concerned that the OCC rule would effectively gut their state usury laws. The Conference of State Bank Supervisors, National Association of Consumer Credit Administrators, Military Officers Association of America, and many other groups from all 50 states and the District of Columbia also support Congress overturning the rule.

“The rule runs counter to the widespread goal of rebuilding the economy as we emerge from the pandemic,” said Rachel Weintraub, Legislative Director and General Counsel with Consumer Federation of America. “We applaud President Biden for his quick action, as well as Chairwoman Maxine Waters and Congressman Chuy García for their leadership on this issue in the House and Chairman Sherrod Brown and Senator Chris Van Hollen in the Senate and appreciate their work in overturning this harmful regulation.”

Contact: Rachel Gittleman, 609-571-5953