September 3, 2020
The Honorable Brian P. Brooks
Office of the Comptroller of the Currency
400 7th Street, SW
Washington, DC 20219
Re: Proposed rule to gut longstanding true lender doctrine; Docket ID OCC-2020-0026
Dear Acting Comptroller Brooks:
The undersigned 101 community, consumer, civil rights, and faith organizations write to vigorously oppose the OCC’s proposed rule to gut the longstanding “true lender” anti-evasion doctrine. The proposed rule would trample state interest rate limits and unleash predatory lending in all 50 states, further exacerbating the economic impacts already experienced by COVID-19.
Interest rate limits are the single most effective tool states have to protect their residents from predatory loans. Predatory loans include payday and car title loans that often carry annual interest rates as high as 300% or more, as well high-cost installment loans and lines of credit with rates approaching and well exceeding 100%. Importantly, even high-cost loans that are less expensive than 300% APR are far more likely to compound borrowers’ unaffordable debt burdens than to “compete” with 300% APR loans and bring borrowers relief.
At least 45 states and the District of Columbia (DC) have rate caps on installment loans, with median annual percentage rates of 25%-38.5% depending on the loan terms. Sixteen states and DC—representing about a third of the U.S. population—enforce annual percentage rates of 36% or less that keep all high-cost loans out of their state.
The OCC’s proposal could render these longstanding interest rate limits virtually meaningless. Nonbank predatory lenders have long sought shelter in banks’ exemptions from state usury limits by laundering their loans through banks. But states have successfully stamped out rent-a-bank scams by exposing that the true lender is in fact the non-bank predatory lender that is involved from the outset and has the predominant economic interest in the loan. The OCC proposal seeks to eliminate the true lender doctrine, and bar courts from looking past contrivances to what is true, by dictating that merely putting the bank’s name on the paperwork makes the bank the lender. The proposal would take away a critical enforcement tool against usury evasions — while upending centuries of law holding that, in matters of usury, including in interpretation of the National Bank Act, substance prevails over form.
The OCC’s assurances that the agency will not permit grossly irresponsible and harmful loans ring hollow. Even now, the OCC is permitting Stride Bank to pilot loans up to 179.99% for CURO’s Verge Credit in a plan to expand to states that do not permit those rates for non-banks. And the OCC has sided with World Business Lenders’ purported right to charge astronomical rates despite extensive litigation involving the predatory small business loans that Axos Bank is enabling for WBL, such as a $90,000 mortgage at 138% APR. Predatory loans target financially distressed individuals and disproportionately prey on communities of color, stripping them of income, exacerbating financial exclusion, and widening the racial wealth gap.
We reject any notion that this proposal will serve our communities by expanding access to affordable credit. Instead, it will invite the spread of predatory lending while hamstringing the most effective tools to stop it: state interest rate limits.
We appreciate your consideration of our concerns.
American Civil Liberties Union
Americans for Financial Reform Education Fund
Center for Responsible Lending
Consumer Federation of America
Credit Builders Alliance
Habitat for Humanity
Innovative Systems Group Inc.
National Association of Consumer Bankruptcy Attorneys
National Baptist Convention USA
National Consumer Law Center (on behalf of its low-income clients)
Southern Poverty Law Center Action Fund
Student Borrower Protection Center
Alabama Appleseed Center for Law & Justice
United Way of Tucson and Southern Arizona
Arkansans Against Abusive Payday Lending
Arkansas Community Institute
Arkansas Community Organizations
East Bay Community Law Center
Public Law Center
Shoreline Study Center
The Bell Policy Center
CoPIRG (Colorado Public Interest Research Group)
Connecticut Legal Services, Inc.
District of Columbia
Legal Aid Society of the District of Columbia
Jacksonville Area Legal Aid, Inc.
Atlanta Legal Aid Society, Inc.
Manufactured Home Owners Association of Illinois IL
Indiana Institute for Working Families
Indiana United Ways
Marion County Commission on Youth, Inc.
New Hope Collaborative
Maine Equal Justice
Public Justice Center MD
Community Economic Development Assoc. of MI (CEDAM)
Mid-Minnesota Legal Aid
R.A.A. – Ready Aim Advocate
Montana Organizing Project
Rural Dynamics, Inc
Progressive Leadership Alliance of Nevada
New Hampshire Legal Assistance
New Jersey Citizen Action
Action for A Better Community
Brooklyn Cooperative FCU
Empire Justice Center
Hebrew Free Loan Society
Cedar Grove Institute for Sustainable Communities
Charlotte Center for Legal Advocacy
Church Women United
Coastal Credit Union
Disability Rights NC
Elizabeth City Habitat for Humanity
Episcopal Diocese of North Carolina
Financial Protection Law Center
Habitat for Humanity Cleveland County
Latino Community Credit Union
NC Conference of the United Methodist Church
NC State AFL-CIO
New Hope Collaborative
North Carolina Alliance for Retired Americans
North Carolina Council of Churches
North Carolina Justice Center
Olive Hill Community Economic Development Corporation, Inc
Consumer Credit Counseling Service of the Miami Valley
Policy Matters Ohio
VOICE – OKC
CASA of Oregon
Bucks County Women’s Advocacy Coalition
The One Less Foundation
SC Appleseed Legal Justice Center
South Carolina Christian Action Council, Inc.
Brazos Valley Affordable Housing Corp.
Community Enrichment Center
United Way of Central Texas
Legal Aid Justice Center
Virginia Citizens Consumer Council
Solid Ground Washington
Statewide Poverty Action Network