Comments in opposition the Office of the Comptroller of the Currency’s (OCC) proposed rule preempting the authority of states and courts to look beyond contrivances to the truth to prevent evasions of state usury laws.
The proposal would eliminate state interest rate limits for nonbank predatory lenders in every state as long as a bank’s name is in the fine print – nothing more – taking us back to the days of the early 2000s when payday lenders used rent- a-bank schemes to evade state laws. States would lose the power they have had since the time of the American Revolution to limit interest rates to prevent predatory lending, and courts would lose the power they have had for just as long to look behind the fine print to the truth to prevent usury laws from becoming a “dead letter,” as the Supreme Court warned in 1835.
The OCC is asking us to trust that it will not allow predatory lending. But when the OCC is going out of its way to support the right of a predatory small business lender to charge 120% APR, and is doing nothing to stop a payday lender from using an OCC-regulated bank to launder 179% APR installment loans, a naïve trust is no substitute for state interest rate limits. The proposal would embolden a surge of predatory lending to all 50 states, and cause unconscionable harm to individuals and communities.