Explainer: ERLC applauds the Senate for repealing the 2017 OCC ‘True Lender’ rule

May 14, 2021

Last night, the Senate voted 52-47 to repeal the Office of the Comptroller of the Currency’s (OCC) 2017 ‘True Lender’ rule. Republican Sens. Lummis (WY), Collins (ME), and Rubio (FL) voted to pass this bipartisan Congressional Review Act (CRA) aimed at the OCC’s misguided rule. The bill now heads to the House of Representatives for consideration. 

The background 

The 2017 OCC rule allowed payday lenders to partner with out of state banks, thus evading state interest rate caps in their own state. This partnership is known as a “rent-a-bank” scheme allowing banks to “rent” their name to lenders in an outside state in order to avoid consumer protection laws. The rule states that these partner banks operated as the ‘true lender’ and originator of the loan, so though the consumer and the payday lender are in one state, their state laws did not apply to the loan. 

The ERLC has long applauded states’ efforts to curtail unjust lending practices in their states. Currently, 19 states and the District of Columbia have 36% interest rate caps. We believe that these common sense consumer protection laws should be honored, and not undermined by deceptive regulatory definitions. Predatory lenders should not be granted a loophole from state laws that promote responsible and honest lending practices. 

The average annual interest rate on payday loans in states without an interest rate cap is 391%. This unfair and exorbitant interest rate traps families in cycles of poverty and debt, leading many to rollover their payday loans eight or nine times. 

Calling for an end to payday lending

Scripture speaks clearly against usurious lending practices. A just nation protects consumers from exploitive business relationships and regulates lenders to ensure just treatment. As the Southern Baptist Convention affirmed in 2014, “predatory lending fails to respect the dignity of the person created in the image of God and interferes with human flourishing.”

These values prompted the ERLC to join the Faith for Just Lending Coalition (FJL) and advocate for an end to the payday debt trap. FJL has been working since the 2017 OCC rule was first proposed to oppose its implementation and released a statement yesterday applauding the Senate for its vote to repeal the harmful rule. 

Chairman of the Senate Banking Committee, Sen. Sherrod Brown (OH), conducted a hearing on the CRA and cited FJL and ERLC’s advocacy on this issue: “a broad, bipartisan coalition is asking Congress to overturn the OCC’s harmful True Lender Rule. That support includes […] the Southern Baptist Convention […] and other members of the Faith in Just Lending Coalition.”

Every sector of public life has a role to play in ending payday lending. This includes individuals who should steward their money well, churches who should help financially struggling families and individuals, and governing authorities who should regulate consumer loan interest rates. 

The ERLC is grateful to the Senate for passing such an important bill to curb the proliferation of payday lenders across the country. Predatory lending is out of sync with God’s design for financial relationships, and we celebrate one small step in ending the payday debt trap. 

The ERLC will continue to advocate for the repeal of the 2017 OCC ‘True Lender’ rule as the CRA moves to the House of Representatives, and President Biden’s desk for signature.

Brooke Kramer

Brooke Kramer serves as the Team Coordinator for the Washington, D.C., office. She assists with scheduling, event planning, office coordination, and project management. Brooke graduated from John Brown University with a B.S. in Political Science and Intercultural Studies. Read More by this Author