David Y. Ige | AG News Release: Hawaii Attorney General Urges Congress To Rescind Proposal To Allow Predatory Lenders To Take Advantage Of Consumers
AG Press Release: Hawaii Attorney General Urges Congress To Rescind Proposal To Allow Predatory Lenders To Take Advantage Of Consumers
Posted on Apr 22, 2021 in Latest News, Newsroom
HONOLULU– Hawaii Attorney General Clare E. Connors joined a bipartisan coalition of 25 attorneys general led by Illinois Attorney General Kwame Raoul to urge Congress to use the Congressional Review Act to overturn the Office of the Comptroller of the Currency (OCC) real lender rule. The rule would penalize high-cost loan programs designed to evade state usury laws. These laws, or caps, prevent predatory lenders from taking advantage of consumers by limiting the interest rates that can be charged on loans.
The coalition issued a letter calling for the OCC’s real lender rule to be overturned, as it would allow predatory lenders to bypass state interest rate caps through ‘bank lease’ schemes. , in which banks act as lenders on behalf of state law exemptions for non-bank payday lenders. These arrangements would allow lenders to charge consumers rates that far exceed the rates allowed under US usury laws.
“Predatory lenders cannot be allowed to take advantage of consumers by charging exorbitant interest rates,” Attorney General Connors said. “To prevent the circumvention of our usury laws by unscrupulous lenders, I joined this bipartisan coalition urging Congress to repeal the real lender rule.”
In January 2021, a consortium of states took legal action to prevent the implementation of the OCC’s real lender rule. Congress, however, can resolve this problem by repealing the rule under the Congressional Review Act (CRA). In today’s letter, the coalition urges Congress to pass the pending House and Senate resolutions introduced on March 26, 2021 that use the CRA to repeal the real lender rule. If Congress does not use the CRA to overturn this rule, state litigation to stop the application could take several years. While this litigation is ongoing, predatory low dollar lenders will be able to use bank rental models to bypass state usury caps and harm consumers.
The National Bank Act allows federally regulated banks to charge interest on loans at the maximum rate allowed by their “home” state, even in states where that interest rate would violate usury laws. States. For years, non-bank entities such as payday lenders, auto securities, and installment lenders have attempted to partner with domestic banks to take advantage of banks’ exemptions from interest limits to offer loans. at very high rates in states where such loans are prohibited. The courts have examined these lending relationships and have concluded that because the national bank is not the “real lender” of the loan, the state-imposed usury limits apply to non-bank lenders.
The OCC’s true lender rule would prevent courts from intervening if a national bank is named as the lender on the loan documents or if the bank initially “finances” the loan. In addition, the rule would allow the bank to instantly sell the loan and never take any significant risk on it. This rigid and formalistic approach will only provide an advantage to predatory banks and lenders, to the detriment of diligent and unsuspecting consumers. In addition, the rule represents a radical departure from decades of OCC policy that recommends domestic banks enter into these sham “bank-lease” agreements.
The Attorneys General of Arkansas, California, Colorado, Connecticut, District of Columbia, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Jersey, New York, North Carolina join Attorneys General Connors and Raoul in this letter. , Oregon, Pennsylvania, Rhode Island, South Dakota, Vermont, Virginia and Wisconsin.
A copy of the letter is available here.
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For more information contact:
Gary H. Yamashiroya
Special Assistant to the Attorney General
E-mail: [email protected]