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Lawmakers voted 218 to 208 to roll back the so-called "true
lender" rule, which attempted to clarify what laws applied to
lenders like fintechs when partnered with traditional banks, and
clears the way for its removal as President Joe Biden is
expected to sign it.
"Predatory lenders trap working class communities like mine in
cycles of debt, and the Trump administration's so-called 'True
Lender' rule helps them get around state consumer protection
laws to do it," said Illinois Congressman Jesús "Chuy" García,
who introduced the CRA legislation.
"Repealing this rule empowers states to protect their residents
from debts they can't repay and recognizes the will of people
across the country who have voted to support these protections."
The targeted rule, written last year by the Office of the
Comptroller of the Currency, attempted to clarify whether state
or federal laws applied when lenders like fintechs partnered
with traditional banks.
Democrats and consumer advocates warned it would allow predatory
lenders to skirt state usury laws and interest rate caps by
partnering with national banks that enjoy more lax federal
rules.
The OCC said when it drafted the rule that it was aiming to
provide legal certainty to lenders as to whether state or
federal laws applied to their business.
The regulator determined that if the bank is named as the lender
in the loan agreement, then the relevant bank rules apply,
meaning any partnerships with national banks would operate under
federal rules, which generally are more relaxed on lending
restrictions.
Acting Comptroller of the Currency Michael Hsu said he
"reaffirms the agency's long-standing position that predatory
lending has no place in the federal banking system."
(Reporting by Pete Schroeder; Editing by David Gregorio)
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