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Repeal blocks predatory lenders from evading state interest rate caps
WASHINGTON -- A Congressional Review Act resolution that would protect consumers from predatory moneylenders is headed to President Joe Biden, who is expected to sign it. S.J.Res.15, which passed the House on Thursday after passing the Senate in May, would repeal the Office of the Comptroller of the Currency’s (OCC) “fake lender” rule, issued in October 2020.
The rule greenlit so-called “rent-a-bank” schemes, where predatory lenders partner with or “rent” OCC-regulated banks to evade state limits on interest rates, because banks are exempt from those caps. Unscrupulous lenders fill out the borrower contract with the name of the partner bank even though the lender -- not the bank -- profits from the loan. The soon-to-be-repealed October rule blocked courts from determining who the "true lender" is and keeping that lender from imposing usurious rates.
Mike Litt, U.S. PIRG’s consumer campaign director, issued the following statement:
“The Rent-a-Bank scheme is an old trick in the predatory lending playbook that had been resurrected. It’s a victory for consumers to have Congress take a stand against this zombie practice and repeal the OCC rule,” Litt said. “When President Biden makes it official, he will be sending a clear message that predatory lenders shouldn’t be allowed to evade state laws and make loans with exorbitant interest rates.”
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