Attorneys General Seek to Stop Debt Trap Lending

In a rare form of bipartisan agreement, a group of 25 Attorneys General (AGs) sent a letter today to Congressional leadership urging it to “use the Congressional Review Act (CRA) to rescind the Office of the Comptroller of the Currency’s (OCC’s) “True Lender” rule in order to “safeguard states’ fundamental sovereign rights to protect their citizens from financial abuse.”

The bipartisan letter included the AG in Arkansas, where voters approved a 17% interest rate cap on payday and installment loans in 2010, as well as AGs from Nebraska, South Dakota and Colorado, where voters overwhelmingly supported a 36% interest rate cap. The Nebraska vote last November was the most recent, with 83% of the voters approving the rate limit. Yet in all of these states, voter-approved rate caps are being evaded by high-cost lenders laundering their loans through a few rogue banks, which are not subject to state rate caps. The true lender rule (more accurately, “fake lender” rule) protects those evasions.

The letter states:

“A growing number of states continue to pass state usury interest-rate caps on high-cost small-dollar loans in an effort to protect their consumers from predatory financial products. The OCC’s Rule would be exploited by lenders seeking to circumvent these state interest-rate caps and invite, indeed welcome, predatory consumer-lending partnerships between banks and lightly regulated non-depository lenders. We urge you to use the Congressional Review Act, 5 U.S.C. §§ 801–808…