Washington, D.C. — Attention turns to the House after the Senate passed with bipartisan support a key Congressional Review Act resolution undoing the final OCC “fake lender” rule allowing predatory lenders to violate state authority in all 50 states. Government watchdog Accountable.US urged House Minority Leader Kevin McCarthy and fellow friends of the financial industry in Congress to put consumers first for a change. Californians would be among hardest hit by the Trump-era deregulation that lets greedy payday lenders sidestep state interest rate caps by laundering loans through chartered banks — a scheme known as “Rent-a-Bank” — in order to charge rates of 179% or higher.
In fact, some high-cost lenders have already noted that rent-a-bank relationships could enable them to “replace” their California businesses, despite California’s state interest rate cap passed in 2019. Leader McCarthy has taken nearly $150,000 from the payday loan industry to date, and he must make clear whether he sides with his constituents or his big money contributors.
“The McCarthy caucus faces a choice: either protect consumers, or the profits of predatory lenders by pushing more people into the debt trap just as the economy begins to recover. A triple digit interest payday loan is no less predatory when it’s laundered through a chartered bank, and that’s why this Trump-era special interest loophole is so dangerous,” said Jeremy Funk, spokesman for Accountable.US. “Many in Congress pay plenty of lip service to fighting predatory lending, and this is their chance to prove it. First, get out of way of states who didn’t wait around for Washington to crack down on abuse interest rates. Second, support a strong national interest rate cap.”
Last month, Accountable.US released a new report spotlighting one of the worst predatory lenders that stands to benefit from preserving the Trump era rule: World Business Lenders (WBL). WBL is a New Jersey-based company that uses out-of-state banks to evade state usury laws and sock small business owners with interest rates as high as 268%. WBL has a checkered history of trapping small business owners in the debt trap during the pandemic, leading at least one to lose their home.
In addition, the watchdog group released findings on how the financial industry went all-in in the so-called “True Lender” policy. On top of spending millions on lobbying, the industry gave over $200,000 to signers of a key letter from Congressional Republicans that almost certainly provided political cover for the controversial rule. Notably, the $200k came pouring in during the three weeks before and three weeks after the letter was sent.
# # #