Senate takes first step to repeal Trump-era ‘real lender’ rule
The Senate voted to repeal a Trump-era rule that would make it easier for banks to partner with fintech lenders without breaking state interest rate limits.
The Senate in a 52-47 vote on Tuesday passed a congressional review bill resolution to overturn the Office of the Comptroller of the Currency’s “real lender” rule issued in October. Three Republicans joined majority Democrats in supporting the measure (SJ 15) sponsored by Sen. Chris Van Hollen (D-Md.) And Senate Banking Committee Chairman Sherrod Brown (D-Ohio).
The CRA allows Congress to repeal a rule by simple majority votes in both houses and the president’s signature. The Democratic-controlled House has until the end of the current Congress to follow suit on a resolution (HJ Res. 35) sponsored by Representative Jesús G. “Chuy” García (D-Ill.)
The Biden administration, in a statement ahead of the vote, said it supported the Senate resolution.
The OCC’s true lender rule aims to make it easier for fintechs and other non-bank lenders to partner with domestic banks. Critics say it would allow non-banks to evade state interest rate caps by partnering with domestic banks located in other states with less restrictive limits.
Brown noted that states, including heavily Republican Nebraska and South Dakota, have strict interest rate limits of 36%. The real lender rule would allow fintechs to bypass these caps through so-called “rent-a-bank” systems, he said in ground remarks.
“We know why these common sense laws our states have passed are popular and have bipartisan support in states across the country. People don’t want abusive lenders going after them, their loved ones or their neighbors, ”Brown said.
Access to credit
Lawmakers have used the CRA on only one other Trump-era regulation so far this term. The Senate voted last month to repeal relaxed methane emission standards for oil and gas wells, but the House has not taken action.
The banking industry widely opposed the Senate’s attempt to overturn the real lender rule, and most Republicans opposed the measure.
Senator Pat Toomey (R-Pa.) Said repealing the rule was a “bad idea” that would hurt borrowers who need to access credit.
“These partnerships benefit consumers. By increasing competition in credit markets, they lower the price of financial products, improve credit options and expand consumer choice, ”he told the Senate during the debate.
The resolution won the support of Republican Rep. Cynthia Lummis of Wyoming, Marco Rubio of Florida and Susan Collins of Maine. Lummis said in his ground remarks that the regulation could “increase parity between state and national banks” by facilitating the partnership between national banks overseen by the OCC and fintech lenders.
The CRA bars regulators from implementing an “essentially similar” alternative to a rule repealed by Congress, although the courts have yet to weigh what that means.
New Acting Currency Comptroller Michael Hsu announced Monday that he plans to undertake a review of existing OCC regulations, potentially including the actual regulation of lenders.