Consumer Advocates Call on House to Overturn “Fake Lender” Rule

Andy Spears
2 min readJun 16, 2021

Following a bipartisan Senate vote in May that approved legislation to overturn a Trump-era policy that allowed predatory payday lenders to get around state interest rate caps by using so-called “rent-a-bank” schemes, advocates are now calling for swift House action on the measure.

The National Consumer Law Center sent the following message to supporters:

The U.S. House could soon vote on a resolution to overturn the “fake lender” rule, which protects rent-a-bank schemes where predatory consumer and small business lenders charge interest rates of up to 200% APR, evading state- and voter-approved rate caps. Recently passed 52–47 in the Senate, and introduced in the House by Rep. Jesús “Chuy” García (D-IL), the Congressional Review Act resolution of disapproval (H.J. Res. 35/S.J. Res. 15) would overturn the “fake lender” predatory lending rent-a-bank rule.

The Office of the Comptroller of the Currency’s (OCC) rushed “fake lender” rule protects “rent-a-bank” schemes in which predatory lenders (the true lender) launder their loans through a few rogue banks (the fake lender), in order to claim that it is a “bank loan” exempt from state interest rate caps. The fake lender rule overrides 200 years of case law allowing courts to see through usury evasions, and replaces it with a pro-evasion rule that looks only at the fine print on the loan agreement.

The fake lender rule is being used right now to defend predatory loans that are harming small businesses, veterans and consumers, so it is urgent for Congress to repeal it.

Photo by Eduardo Soares on Unsplash

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Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .