Public Interest Research Group Calls for Repeal of Trump-era Rule Creating Payday Lending Loophole

3 min readMar 24, 2021

With just a few days left before a crucial deadline, a broad coalition of organizations is calling for Congress (letter) to eliminate a Trump-era regulation that took effect in December and could “unleash predatory lending in all fifty states.” The rushed “fake lender” rule, which was issued by the acting director of the obscure but powerful national bank regulator, the Office of the Comptroller of the Currency (OCC), would facilitate “rent-a-bank” schemes whereby predatory lenders launder their loans through a few rogue banks, which are exempt from state interest rate caps, through a superficial partnership meant to evade critical predatory lending rules.

“The OCC’s so-called “true” lender rule allows predatory lenders to trap vulnerable consumers in a debt trap by evading state protections to cap interest rates that have existed since the time of the American Revolution. This “fake lender” rule needs to be overturned to prevent these lenders from enabling 179% or higher loans to consumers, including those in our most vulnerable communities, like low-income families and borrowers of color.” said Lucy Baker, Consumer Program Associate for PIRG.

As was done more than a dozen times under President Trump, this Congress could use the Congressional Review Act (CRA) to rescind recently finalized regulations, including the OCC’s “fake lender” rule, with just a majority vote in both chambers, limited debate, no filibuster, and the president’s signature. However, to be considered, there is a strict deadline for CRA resolutions to be introduced, estimated to be April 4. With spring recess coming up, the practical deadline is likely the end of this week. A CRA of the OCC “fake lender” rule has not yet been introduced. These resolutions also must be voted upon by a certain date, currently estimated for sometime between May 10 and May 21.

The coalition of signatories to the letter to date consists of 325 groups, including U.S. PIRG and all state PIRGs, civil rights, community, consumer, faith, housing, labor, legal services, senior rights, small business, student lending, and veterans organizations representing all 50 states and the District of Columbia. The letter states that “[t]he rule replaces the longstanding ‘true lender’ anti-evasion doctrine with a ‘fake lender’ rule that allows lenders charging rates of 179% or higher to evade state and voter-approved interest rate caps merely by putting a bank’s name on the paperwork — just as payday lenders were doing in the early 2000s.”

The groups warn, “These lenders charge triple-digit interest rates, target the financially vulnerable and communities of color, and trap consumers in devastating cycles of debt. Currently, there are only a few of these rogue, predatory lenders, but they will spread to all 50 states if the OCC rule is not overturned.”

A 2-pager explanation of the “fake lender” rule is here.