May 11, 2021

NAFCU calls on Congress to overturn OCC's 'true lender' rule

Capitol HillNAFCU Vice President of Legislative Affairs Brad Thaler Monday called on senators to support a resolution to use the Congressional Review Act to nullify the Office of the Comptroller of the Currency's true lender rule. The chamber could vote on the resolution this week.

The true lender rule allows banks and federal savings and loan companies to provide their charter to online lenders so they can deliver high-cost loans with annual rates over 100 percent, evading state consumer protections and usury caps and promoting predatory payday lending. Several states have filed suit against the OCC to try to overturn the rule.

"Rather than pursuing problematic options like the OCC’s True Lender rule to increase access to credit, we would suggest Congress consider consumer-friendly alternatives such as expanding credit unions’ ability to offer [payday alternative loans (PALS)]," Thaler wrote to the Senate. "Too many Americans are unbanked, underbanked, or underserved by financial institutions, and do not have the access that they need to financial services. Credit unions stand ready to help with financial literacy education and access to loans and other financial products, including PALs, but many are limited in their ability to add underserved areas to their fields of membership.

"Allowing all credit unions to add underserved areas to their fields of membership is one way to help those who need it most have access to capital without burdening the federal government. This request has bipartisan NCUA Board support."

Thaler explained that PALs offered by credit unions are "a safe, affordable option for consumers in need of a quick, short-term, small-dollar loan" at a significantly lower interest rate than those offered by predatory payday lenders.

The Senate Banking Committee recently held a hearing to discuss the reemergence of rent-a-bank schemes as a result of the true lender rule. NAFCU raised its concerns about the rule – especially amid the coronavirus pandemic when many Americans are struggling financially – as well as fintech companies taking advantage of chartering options and loopholes to evade proper oversight in the financial system.

NAFCU will continue to advocate for effective financial regulation that provides a level playing field for credit unions and proper consumer protections.