Issue Briefs

ERLC opposes the OCC’s “True Lender” rule

May 13, 2021

The ERLC opposes unjust lending practices that exploit the vulnerable, are predicated on consumer loss, and trap families in cycles of debt. Payday lending serves as a significant contributing factor to the economic struggle for many Americans. The practice of providing short-term cash loans at unreasonably high interest rates forces families and individuals to make financial decisions that are often impossible to recover from. Southern Baptists are opposed to predatory lending practices that target financially unstable persons. Any lending practice that intentionally uses and exposes vulnerable individuals is unacceptable and should be strictly regulated by government protections.

Scripture strongly condemns usurious and exploitative lending practices. Recognizing the dignity of every person extends to business and financial relationships as well as interpersonal ones. As the Southern Baptist Convention affirms, “God is opposed to those who take advantage of the weak, poor, and vulnerable” and “predatory lending fails to respect the dignity of the person created in the image of God and interferes with human flourishing.”

Currently, 19 states and the District of Columbia have implemented interest rate protections to prohibit predatory lenders from exploiting vulnerable Americans. The Office of the Comptroller of the Currency (OCC)’s “National Banks and Federal Savings Associations as Lenders” rule overrides existing state protections by legalizing predatory lending even in states that have prohibited it.

The OCC‘s rule allows non-bank lenders to partner with banks as the “true lender” and evade state interest rate caps. Lenders can charge unfair interest rates regardless of existing state protections under the OCC’s “true lender” rule. 

The average annual interest rate on payday loans in states without an interest rate cap is 391 percent. This high-cost lending often traps families in cycles of debt that leave already impoverished families with crippling debts. The payday lending industry exploits individuals with financially desperate situations. The industry’s business model is predicated on borrower failure and specifically targets vulnerable people. Predatory lenders should not be granted a loophole from state laws that promote responsible and honest lending practices. 

The ERLC strongly opposes the OCC’s “True Lender” rule as it undermines state authority, threatens existing consumer protections, and allows predatory lenders increased access to financially vulnerable Americans.