New York (AP) — Thursday’s parliament has overturned a set of regulations enacted on the last day of the Trump administration, effectively allowing payday loan lenders to circumvent interest rate-restricting state laws.
The House of Representatives cast 218-208 votes to overturn the Office of the Comptroller’s payday loan regulations, with one Republican voting for the Democratic Party.
Thursday’s vote to overturn the OCC’s “true lender rules” was the first time a Democrat in Parliament had successfully overturned regulation using the Parliamentary Test Act.
The law was enacted in the mid-1990s, empowering Congress to dismiss federal agency rules and regulations by a simple majority vote in the House of Representatives and the Senate. Its authority is limited to a specific period of time after the agency finalizes the regulation, typically about 60 legislative days.
The Senate voted 52-47 to overturn OCC rules on May 11. The bill is currently being sent to President Joe Biden, who is expected to sign.
The Democratic Party sought to stop the payday loan practice, which critics called the “bank lending” system, by overturning the rules of the Trump administration enacted in late 2020.
Payday loan lenders are regulated at the state level, but payday loan lenders partner with banks with national bank charters to create large installment loans. National banks are not based in any state and are not subject to the usury laws of individual states.
“State interest rate restrictions were the easiest way to stop predatory lending, and OCC rules would have avoided them altogether,” said the deputy director of the National Consumer Law Center, a consumer advocacy group. One Lauren Sanders said.
This is not the first time that “bank rent” has become an issue. Federal regulators cracked down on this practice in the 1990s, but it is growing again with the proliferation of fintech companies specializing in online banking and online-only financial services.
An example of how this practice works can be found in Elevate, a Texas-based fintech company that offers high-value installment loans such as payday loans. Elevate offers loans in several states, including Arizona. Arizona limits payday loan interest rates to 36%. Elevate uses banks in Utah and Kentucky to make these loans, so Elevate can take out as much as 149% in Arizona. In other states, Elevate has a 299% annual loan.
In a statement, Biden’s office of the Comptroller of the Currency said he “respected” Congress overturning their regulations.
“We want to reaffirm the long-standing position of government agencies that predatory lending does not exist in the Federal Reserve,” said Michael J. Sue of the Office of the Comptroller of the Monetary Affairs in a statement.
Thursday’s vote was the first Democratic vote, but former President Donald Trump and the Republican-controlled parliament used the Parliamentary Review Act when he came to power in 2017 and was enacted during the Obama administration’s decline. Overturned 15 rules and regulations.
Prior to Trump, the law was used only once when Congressional Republicans resolved to abolish a series of ergonomic regulations enacted on the final day of the Clinton administration in 2001.
Congress removes Trump-era regulations on payday lenders
Source link Congress removes Trump-era regulations on payday lenders