David Y. Igé | AG Press 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 22 Apr 2021 in Recent news, Writing

HONOLULUHawaii 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 law on the review of the Congress to repeal 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. Such 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 repeal of the OCC’s True Lender Rule, as it would allow predatory lenders to bypass state interest rate caps through “rent-a” programs. -bank ”, in which banks act as lenders only in name, passing on their exemptions from state law for non-bank payday lenders. These arrangements would allow lenders to charge consumers rates that far exceed the rates allowed by 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 state 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 filed a complaint to prevent the implementation of the OCC’s True 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 repeal this rule, the state’s 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 evade state usury limits 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. the state. 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 state interest limits to provide ultra-high rate loans in states where such loans are prohibited. The courts have reviewed these lending relationships and concluded that because the national bank is not the “real lender” of the loan, state 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 a 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 offer an advantage to predatory banks and lenders, to the detriment of diligent and unsuspecting consumers. Moreover, the rule represents a radical departure from decades of OCC policy urging national banks to enter into these fictitious “rent-a-bank” deals.

Attorneys General Connors and Raoul in this letter are the Attorneys General for Arkansas, California, Colorado, Connecticut, District of Columbia, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Jersey, New York, North Carolina. , 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

(808) 586-1284

E-mail: [email protected]

The Web: http://ag.hawaii.gov

Twitter: @ATGHIgov

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