Washington, D.C., April 27, 2021 — Eric Lechtzin, the Pennsylvania State Chair of the National Association of Consumer Advocates (NACA), joined leaders from 36 states in signing a letter to the U.S. Congress demanding that it immediately pass a resolution to rescind a “sweeping and extreme regulation” issued last year by the Office of the Comptroller of the Currency (OCC). The so-called “rent-a-bank” rule allows non-bank lenders charging up to 179% APR or more to disregard state usury laws merely by adding a bank’s name to the loan agreement and claiming that it is a “bank loan” that can charge interest above state law rate caps. These non-bank lenders benefit from the federal law that exempts national banks and federal savings associations from state rate cap laws.
Relying on a substance-over-form anti-evasion doctrine endorsed by the Supreme Court, courts of nearly every state have found that non-bank lenders were the true lenders of loans, and therefore subject to the respective state usury laws. The OCC rule disregards 200 years of case law allowing courts to follow the money to prevent evasions of state usury laws. NACA has called on Congress to preserve states’ interest rate caps by repealing this harmful and invasive policy.
The state chair letter also noted the ongoing COVID-19 health and financial emergency. When families and small businesses are struggling and fighting to survive, state governments should be able to enforce their laws to shield residents and small businesses from usurious loans. The NACA letter can be found here: NACA Leaders in 36 States, DC Balk at “Fake Lender” Rule|consumeradvocates.org