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New Banking Rule Change Gets No Support from Consumer Groups Consider The Consumer

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New Banking Rule Change Gets No Support from Consumer Groups

Several consumer groups expressed their disapproval with the Office of Comptroller of the Currency (OCC)’s proposed rule change. This new banking rule change will attempt to overturn state laws limiting how much interest consumers can be charged.

At this time, 45 states have rules that limit interest rates at a certain level, usually around 36 percent. Thus, making it hard for small-dollar lenders to operate in those states since the interest rate on these short-term loans is high.

National banks aren’t covered by state laws. Thus, some payday lenders proposed teaming up with a bank when they make short-term loans. In this proposition, consumers will obtain the loan from a payday loan storefront. However, the source of the loan is from the unregulated bank on paper. Under the law, this unregulated bank can charge whatever it wants.

“Under this proposal, a bank makes a loan if, as of the date of origination, it is named as the lender in the loan agreement or funds the loan,” the OCC stated proposed rule change.

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Critics Disapprove Due to Consumers Being Vulnerable to Financial Instability

According to critics, OCC’s proposal makes consumers vulnerable to dangerous lending practices which could result in financial instability.

“This proposed rule would unleash predatory lending in all 50 states, including the 45 states that have enacted interest rate caps to protect their residents from exploitive, high-cost loans,” stated Rachel Gittleman, financial services outreach manager at the Consumer Federation of America (CFA).

Meanwhile, the Center for Responsible Lending (CRL) tagged the rule change as an “end run.” They said that the proposition would allow lenders to overcome state regulations that limit interest rates. Some critics even regarded it as a “rent-a-bank” scheme, in which the bank of record has little involvement in the actual loan. The bank only loans money to the third-party lender, and then this third-party lender will loan it to the consumer.

“The OCC’s proposal provides that a bank ‘makes’ the loan and thus is the lender — so that state interest rate laws do not apply — so long as the bank’s name is on the loan agreement or the bank funds the loan,” CRL stated. “This rule would prohibit courts from looking behind the fine print form to the truth about which party is running the loan program and is the ‘true lender.”

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Editor’s note on OCC’s Proposed Banking Rule Charge:

This piece is written to educate you about the OCC’s Proposed Banking Rule Charge. If you have questions regarding this news, send us a message.

We’d be happy to help you take a step in the right direction, fight this issue, and better enable you to join in on any potential consumer class action. If interested, please send an email to, find us on Twitter or Facebook, or even connect with us directly on our website! We look forward to hearing from you all.

Similarly, please check out our current list of Class Actions and Class Action Investigations, here.

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