Special purpose “national bank” charters will allow nonbank lenders to ignore state interest rate caps
WASHINGTON – The Office of the Comptroller of the Currency’s (OCC) plan, announced today, to accept applications for “fintech” national bank charters, is both outside its authority and risks an expansion of predatory lending across the country, according to advocates at the National Consumer Law Center, Americans for Financial Reform, the Center for Responsible Lending, the Consumer Federation of America, and U.S. PIRG. National banks can ignore state interest rate limits, and the OCC is now planning to grant “national bank” charters to lenders that do not take deposits or otherwise function as traditional banks. A report released today by the U.S. Treasury Department also recommends that the OCC grant such charters. In 2017, more than 250 organizations sent a letter to the OCC opposing a fintech national bank charter.
“State interest rate limits are the primary protection against predatory lending, and giving ‘national bank’ charters to nonbank lenders could open the floodgates to a wide range of predatory actors making loans at 100 percent APR or higher,” said Lauren Saunders, associate director of the National Consumer Law Center. Two-thirds of the states cap a $2,000 loan at 36 percent or less, but a nonbank charter could allow lenders to avoid those limits.