Congressional Democrats Introduce Resolution Undoing OCC’s True Lender Rule
Last week, U.S. Senators Chris Van Hollen (D-Md.), Sherrod Brown (D-Ohio), and Representative Chuy Garcia (D-Ill.) introduced a resolution aimed at undoing the Office of the Comptroller of the Currency’s (OCC) ‘True Lender’ rule, issued in October 2020. The resolution uses provisions in the Congressional Review Act (CRA), which according to a report from the Congressional Research Service, is “an oversight tool that Congress may use to overturn rules issued by federal agencies.”
“If a joint resolution of disapproval is submitted within the CRA-specified deadline, passed by Congress, and signed by the President, the CRA states that the disapproved rule ‘shall not take effect (or continue),’” the report notes. “That is, the rule would be deemed not to have had any effect at any time. Even provisions that had become effective would be retroactively negated. Furthermore, if a joint resolution of disapproval is enacted, the CRA provides that a rule may not be issued in ‘substantially the same form’ as the disapproved rule unless it is specifically authorized by a subsequent law.”
The senators argued that the rule permits lenders to skirt usury laws and consumer protections by partnering with banks with looser rules. “We will not let this rule stand ⎯ nor will we sit idly by as predatory lenders attempt to take advantage of hardworking Americans,” Van Hollen said.
The resolution came after a coalition of liberal advocates requested that lawmakers undo the OCC’s rule. The OCC said the rule clarifies a muddled legal matter, but Democrats and lawyers have expressed that it allows lenders to circumvent state borrower protection laws.
“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,” said Brown, who chairs the Senate Committee on Banking, Housing, and Urban Affairs. “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.”
A Reuters article highlighting the resolution noted that seven states and Washington D.C. sued a banking regulator in January as they sought to void the rule to better enforce state laws against exploitative interest rates.