The National Consumer Law Center (NCLC) is highlighting some big wins for consumers thanks to recent actions in Congress.
In a close but ultimately bipartisan vote, the U.S. Senate last week voted to overturn a regulation issued in the waning days of the Trump Administration that would allow predatory lenders to make loans with exorbitant interest rates approaching or exceeding 200% in states that prohibit such loans. The “fake lender” rule allows non-bank lenders to ignore state interest rate limits as long as a federally-chartered bank’s name is on the paperwork. The rule threatens to pave the way for a massive expansion of predatory lending in all 50 states.
The Senate’s passage of S.J. Res. 15, a resolution introduced by Senators Chris Van Hollen (D-MD) and Sherrod Brown (D-OH) to overturn the Office of the Comptroller of the Currency’s (OCC) “fake lender” rule under the Congressional Review Act (CRA), is a major victory for consumers — but our work to overturn this anti-consumer rule is not yet done. The U.S. House of Representatives must pass the resolution and send it to the President for his signature. Rep. Jesus “Chuy” García has introduced a parallel resolution, H.J. Res. 35, in the House.
NCLC and our coalition partners are redoubling our efforts to ensure that the House moves to curb the “rent-a-bank” schemes allowed by this rule in the 45 states that cap or otherwise regulate interest rates. NCLC Associate Director Lauren Saunders, who is leading NCLC’s efforts to overturn the “fake lender” rule (as well as many other forms of predatory lending), notes that “the OCC fake lender rule… is doing active harm right now, defending a predatory business model that destroys small businesses, homes, and lives.” She urged the House to act quickly to begin the process of repealing the rule. “Small businesses and families devastated by COVID, especially in Black and Brown communities, cannot wait.”
And on Debt Collection:
The U.S. House of Representatives passed the Comprehensive Debt Collection Improvement Act (HR 2547), which contains provisions that will protect vulnerable consumers from abusive debt collection practices and bring much-needed clarity to debt collection rules.
Prior to the COVID-19 pandemic, more than 68 million adults in the U.S. had one or more debts in collection on their credit reports. Consumer debt has continued to grow during the pandemic, exceeding $14 trillion at the end of 2020. The Act would enact a wide variety of critically-needed reforms that will protect consumers from abusive debt collection practices, including:
- Prohibiting the use of confessions of judgment as an unfair credit practice that eliminates notice and the right to be heard;
- Prohibiting certain abusive collection practices directed at servicemembers, including threats to reduce rank or revoke security clearance;
- Requiring discharge of private student loans due to total and permanent disability;
- Prohibiting collection of medical debt by debt collectors for the first two years and credit reporting of debt arising from any medically necessary procedures;
- Requiring debt collectors to obtain consent before using electronic communications and to provide written validation notices;
- Amending the FDCPA to expand and clarify coverage, including extending coverage for all federal, state, and local debts collected by debt collectors;
- Adjusting statutory damages in the FDCPA for inflation and indexing them for inflation in the future; and
- Clarifying FDCPA coverage for non-judicial foreclosures.
The Act is sponsored by Financial Services Committee Chairwoman Maxine Waters (D-CA), whom NCLC commends for her leadership. We are also grateful to everyone who is fighting alongside NCLC on this issue, and will keep you updated on the Act’s path through the Senate, as well as our other work to advance stronger consumer protections for people and families struggling with debt.
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