States and DC Sue OCC Over True Lender Rule
A coalition of eight Attorneys General sued the Office of Comptroller of the Currency (OCC) over its recently finalized “True Lender Rule.” The group, including representatives from New York, California, and New Jersey, filed a complaint that alleges that the OCC’s rule is an attempt to unlawfully circumvent state lending laws.
“Rent-a-bank schemes undermine the civil and criminal usury laws New Jersey has put in place to protect our residents,” said New Jersey Division of Consumer Affairs Director Paul R. Rodríguez. “Our laws have kept unscrupulous lenders from gaining a foothold in our state, but this new rule undermines those protections and will make it easier for predatory payday and vehicle title lenders to profit at the expense of New Jersey consumers.”
Under the National Bank Act, banks licensed by the OCC function under extensive oversight but can charge interest rates at the maximum allowed in their “home” state anywhere in the country. The complaint alleges alternative lenders partner with national banks, “renting” their name.
This has been happening for years, but NJ Attorney General Grewal argues that these “Trump-era” policies must be reversed because “many families are struggling economically.”
The final rule from the OCC went into effect on Dec 29. Similar court battles have occurred at the state level, as in Colorado vs. alternative lenders Avant and Marlette and their banking partners. The case was settled.Last modified: January 5, 2021
Kevin Travers was a Reporter at deBanked.