March 25, 2021

Van Hollen, Brown, Garcia Announce Congressional Review Act Legislation to Repeal Trump-era “Rent-A-Bank” Rule

Rule Allows Predatory Lenders to Circumvent State Borrower Protection Laws, Charge Vulnerable Consumers Outrageous Interest Rates

Today, U.S. Senator Chris Van Hollen (D-Md.), a member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Committee Chairman Sherrod Brown (D-Ohio), and Congressman Chuy Garcia (D-IL4) announced legislation to repeal the Trump Administration’s so-called True Lender Rule through the use of the Congressional Review Act. This regulation, finalized in the last months of the prior Administration, allows predatory lenders to skirt state laws meant to curb interest rates on loans and opens the doors for these lenders to prey on vulnerable consumers.

“The Trump Administration ripped consumer protections to shreds, leaving Americans vulnerable to unscrupulous predatory lenders who charge outrageous interest rates. When this rule was finalized in October, I vowed to use every tool at our disposal to strike it down. Today, we’re one step closer to fulfilling that. We will not let this rule stand – nor will we sit idly by as predatory lenders attempt to take advantage of hardworking Americans,” said Senator Van Hollen.

“Congress must overturn this harmful Trump Administration Rule rule that eviscerates state consumer protection laws and allows unregulated payday lending across the nation. For years, under both Democratic and Republican administrations, federal regulators cracked down on abusive “rent-a-bank” schemes in which payday lenders funnel their high-interest, predatory loans through national banks to evade state interest rate caps. The OCC’s rule is a complete reversal of this policy, a betrayal of hard-working American families, and a shameful attack on states’ ability to protect their citizens from predatory loans,” said Senator Brown.

“Predatory loans trap working families into cycles of debt they can’t pay off, and the Trump Administration’s True Lender Rule helps lenders get around state laws that protect consumers. Just this week Illinois enacted a law that caps interest rates on consumer loans at 36%, but my constituents won’t be fully protected until the True Lender Rule is repealed,” said Congressman Jesús “Chuy” García. “People are struggling to make ends meet due to the economic crisis caused by the COVID pandemic, and more vulnerable than ever to predatory loans. Congress should act quickly to repeal this flawed rule that undermines important safeguards set by state governments like mine.”

The legislation is cosponsored by Senator Jack Reed (D-RI), Senator Elizabeth Warren (D-MA), Senator Catherine Cortez Masto (D-NM), Senator Tina Smith (D-MN), and Senator Dianne Feinstein (D-CA).

"Senators Van Hollen and Brown are standing up to restore the power that states and courts have had since the time of the American Revolution to prevent evasions of critical state interest rate limits that stop predatory lending, The OCC's rule eviscerates those powers and protects predatory lenders," said Lauren Sanders, the Associate Director of the National Consumer Law Center.

“We applaud Senators Van Hollen and Brown and Rep. Garcia for taking the first step to overturn this harmful rule,” said Lisa Stifler, Director of State Policy for the Center for Responsible Lending. “The ‘fake lender’ rule gives predatory lenders a roadmap to evade state consumer protections while consumers get weak, vague standards from an agency that has too often failed to protect consumers. In the midst of an unprecedented public health pandemic and a severe economic crisis, and as we continue to reckon with our history of structural racism, regulators should be reinforcing and strengthening longstanding safeguards, not gutting them. 

"The OCC rule opens a pathway for predatory lenders to ignore state consumer protections and extract wealth from the most vulnerable consumers. Congress must take action to reverse this rule to protect consumers from exploitation," said Linda Jun, senior policy counsel at Americans for Financial Reform.

Bill Background

Most states and the District of Columbia have rules in place to protect consumers from predatory loan rates but federally-insured, state-chartered banks are exempt through the Federal Deposit Insurance Act. The OCC rule allows non-banks to use superficial and deceptive partnerships with banks to skirt state laws and charge outrageous annual percentage rates that have gone as high as 179%. In these “rent-a-bank” schemes, the bank attaches its name to the transaction while customer deals entirely with the non-bank lender, who markets, underwrites, arranges, and collects payments on the loan.

The Congressional Review Act offers a mechanism for Congress to repeal federal agency rules. Agencies submit their rules to Congress, and it can pass a joint resolution of disapproval to overturn the action under an expedited procedure. Today’s bill would overturn the OCC’s so-called True Lender Rule and ensure that consumers are protected from predatory “rent-a-bank” schemes.