Small Business Groups Applaud Congressional Effort to Stop Predatory Lenders
Main Street Alliance, a coalition representing small businesses around the country, is cheering the introduction of federal legislation that would rein-in predatory lenders that prey on small businesses as well as individuals.
“Small businesses struggling with the ongoing COVID crisis are at risk to predatory rent-a-bank schemes who prey on their dire need for access to capital. We applaud Senator Van Hollen, Senator Brown and Representative Garcia for introducing resolutions to overturn the OCC’s horrible fake lender rule, which protects predatory small business lenders that are trying to evade state laws that protect small businesses,” said Main Street Alliance Government Affairs Director Didier Trinh. “We must protect our small businesses during the incredibly vulnerable time. Rent-a-bank schemes and predatory lenders should not have the protection of federal regulation.”
Consumer groups have been pressuring Congress for the change in a rule ushered in by the Trump Administration.
“Congress must act to overturn this dangerous rule that will unleash predatory lending in all 50 states. Predatory lenders prey on veterans, small businesses, and communities of color, luring them into harmful loans that strip these consumers of hard-earned capital. Congress can, and should, stop these lenders by overturning the ‘fake lender’ rule,” said Rachel Gittleman, Financial Services Outreach Manager with Consumer Federation of America.
U.S. Senator Chris Van Hollen (D-Md.), a member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Committee Chairman Sherrod Brown (D-Ohio), and Congressman Chuy Garcia (D-IL4) announced legislation to repeal the Trump Administration’s so-called True Lender Rule through the use of the Congressional Review Act. This regulation, finalized in the last months of the prior Administration, allows predatory lenders to skirt state laws meant to curb interest rates on loans and opens the doors for these lenders to prey on vulnerable consumers.
“The Trump Administration ripped consumer protections to shreds, leaving Americans vulnerable to unscrupulous predatory lenders who charge outrageous interest rates. When this rule was finalized in October, I vowed to use every tool at our disposal to strike it down. Today, we’re one step closer to fulfilling that. We will not let this rule stand — nor will we sit idly by as predatory lenders attempt to take advantage of hardworking Americans,” said Senator Van Hollen.
“Congress must overturn this harmful Trump Administration Rule rule that eviscerates state consumer protection laws and allows unregulated payday lending across the nation. For years, under both Democratic and Republican administrations, federal regulators cracked down on abusive “rent-a-bank” schemes in which payday lenders funnel their high-interest, predatory loans through national banks to evade state interest rate caps. The OCC’s rule is a complete reversal of this policy, a betrayal of hard-working American families, and a shameful attack on states’ ability to protect their citizens from predatory loans,” said Senator Brown.
“Predatory loans trap working families into cycles of debt they can’t pay off, and the Trump Administration’s True Lender Rule helps lenders get around state laws that protect consumers. Just this week Illinois enacted a law that caps interest rates on consumer loans at 36%, but my constituents won’t be fully protected until the True Lender Rule is repealed,” said Congressman Jesús “Chuy” García. “People are struggling to make ends meet due to the economic crisis caused by the COVID pandemic, and more vulnerable than ever to predatory loans. Congress should act quickly to repeal this flawed rule that undermines important safeguards set by state governments like mine.”
The legislation is cosponsored by Senator Jack Reed (D-RI), Senator Elizabeth Warren (D-MA), Senator Catherine Cortez Masto (D-NM), Senator Tina Smith (D-MN), and Senator Dianne Feinstein (D-CA).
“Senators Van Hollen and Brown are standing up to restore the power that states and courts have had since the time of the American Revolution to prevent evasions of critical state interest rate limits that stop predatory lending, The OCC’s rule eviscerates those powers and protects predatory lenders,” said Lauren Sanders, the Associate Director of the National Consumer Law Center.
For more on consumer protection issues, follow Andy Spears