By Katanga Johnson and Pete Schroeder
WASHINGTON (Reuters) – Democratic U.S. lawmakers will seek to repeal a banking rule put in place under former President Donald Trump that they argue allows banks to skirt stricter state lending rules, pursuing a resolution to undo the so-called “true lender” regulation.
Staff with Senator Chris Van Hollen’s office told Reuters the senator, along with other Democrats including Senate Banking Committee Chairman Sherrod Brown, plan to introduce the measure later on Thursday in the Senate.
A similar resolution is expected to be introduced in the House of Representatives on Friday, according to congressional sources familiar with the matter.
The resolution would overturn the rule by invoking the Congressional Review Act, a 1996 law that empowers Congress to reverse recently finalized federal regulations. Passage would require only a simple majority vote in the two chambers. Democrats hold slim majorities in the House and Senate.
The move by lawmakers could deal a blow to financial technology firms that had backed the rule as a way to help them partner with small banks and credit unions across the United States.
Democrats have argued that the rule allows predatory lenders to skirt state consumer protections and usury laws by partnering with banks that face looser requirements.
“We will not let this rule stand – nor will we sit idly by as predatory lenders attempt to take advantage of hard-working Americans,” Van Hollen said in a statement.
Brown in a statement called the rule a betrayal of American families and “a shameful attack on states’ ability to protect their citizens from predatory loans.”
Last October, the Office of the Comptroller of the Currency issued the rule, saying the regulation would clarify which institution is considered the “true lender” of a loan, which in turn would determine what requirements the loans must meet. The OCC said at the time that the rule would clear up a murky legal matter, particularly when it comes to non-bank lenders partnering with banks across multiple states.
On Monday, a coalition of liberal advocates called https://www.nclc.org/media-center/days-before-crucial-deadline-the-national-consumer-law-center-joins-over-300-groups-calling-for-congress-to-rescind-fake-lender-rule-that-facilitates-predatory-loan-schemes.html on lawmakers to undo the rule using the Congressional Review Act, saying that the regulation enables lenders “to charge triple-digit interest rates, target the financially vulnerable and communities of color, and trap consumers in devastating cycles of debt.”
In January, seven U.S. states and Washington, D.C., sued the OCC seeking to void the rule.
(Reporting by Katanga Johnson and Pete Schroeder; Editing by Michelle Price and Will Dunham)
