INDIANAPOLIS, IN – The Indiana Asset and Opportunity Network [Indiana A&O Network] applauds the Senate for voting for the Congressional Review Act resolution to overturn the OCC’s “fake lender” rule, which allows predatory lenders to evade state interest rate laws by putting a bank’s name on the paperwork. In a 52 - 47 bipartisan vote on May 12, the U.S. Senate voted to approve S.J. Res. 15, a resolution under the Congressional Review Act (CRA), which was introduced by Senators Chris Van Hollen (D-MD) and Sherrod Brown (D-OH). Rep. “Chuy” García introduced a parallel resolution, H.J. Res. 35, in the U.S. House of Representatives. Now that the Senate approved the resolution, the House needs to take urgent action to stop the ongoing harm.
The rushed “fake lender” rule took effect in December and was issued by the Office of the Comptroller of the Currency (OCC). The rule protects “rent-a-bank” schemes whereby predatory lenders (the true lender) launder their loans through a few rogue banks (the fake lender), which are exempt from state interest rate caps. The rule overrides 200 years’ worth of case law allowing courts to see through usury law evasions to the truth, and replaces it with a pro-evasion rule that looks only at the fine print on the loan agreement.
The Indiana A&O Network was part of a broad coalition of more than 375 organizations representing all 50 states and the District of Columbia calling on Congress to overturn the “fake lender” rule, which threatens to “unleash predatory lending in all fifty states.”
A broad, bipartisan cross-section of experts and officials have called on Congress to repeal the fake lender rule. They include a bipartisan group of 25 state attorneys general, concerned the rule would effectively gut their state usury laws. The Conference of State Bank Supervisors, National Association of Consumer Credit Administrators, National Association of Federally-Insured Credit Unions and many other groups also support Congress overturning the rule.
According to national polling, two-thirds of voters (66%) are concerned about the ability of high-cost lenders to arrange loans through banks at rates higher than the state laws allowed. In a statewide poll, an even higher proportion of registered Hoosier voters (88%) support capping the maximum interest on payday loans to 36%.
“Lenders doing business in Indiana should play by Indiana’s rules. Indiana’s legislature limited loan rates and anything above 72% APR is a felony except payday loans which we are working to fix. The “fake lender” rule would allow lenders to circumvent our laws and charge whatever they like. This rule hurts our National Guard, Reserves, Veterans, Gold Star Families, and many others ,” said Indiana A&O Network member Brigadier General James L. Bauerle USA (Ret.).
Predatory lenders charging 100% to 200% APR are already starting to push high-cost installment loans in Indiana that exceed the rates permitted under Indiana law. In light of this fact, the Indiana A&O Network urges Indiana’s House delegation to support H.J. Res. 35 to swiftly overturn the predatory lending rule.
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About the Indiana Assets & Opportunity Network
The Network creates learning opportunities for community leaders, advocates on policies that affect low-to-moderate income families, and builds capacity for organizations aimed to increase financial stability. It is co-led by Prosperity Indiana which is a member organization skilled at building vibrant communities and resilient families; and the Indiana Institute for Working Families (IIWF) which is a program of the Indiana Community Action Association, skilled in research, policy analysis, and advocacy. The Network is directed by a diverse steering committee to help establish program and policy focus. They meet bi-monthly to help identify funding sources, opportunities, and coalition partners.
