State Sen. Leroy Comrie (D-St. Albans) is among those supporting President Biden and state Attorney General Tish James in their efforts to protect consumers from predatory lending.
On June 30, Biden repealed a Trump-era rule, which would allow national banks and federal saving associations to enter partnerships with third parties, like fintech marketplace lenders (Avant, Credit Karma and Fundera for example), in making loans, according to the Davis Polk & Wardwell LLP, an international business law firm.
The true lender rule was finalized October 2020 by the Office of the Comptroller of the Currency, an independent bureau of the U.S. Department of Treasury that charters, regulates and supervises all national banks and federal savings associations as well as federal branches and agencies of foreign banks.
Some Republicans and financial groups welcomed the rule, which had yet to take effect, because it would allow underserved consumers better access to favorable loan rates, according to the Davis Polk law firm. Democrats, however, believed the rule would allow predatory lenders to skirt state interest-rate limits on loans and prey on customers. James had sued to block it.
Comrie, a former member and chairman of the Consumer Affairs committees in both the City Council and state Senate, was grateful that Biden invalidated the rule to ensure protections are in place for consumers going forward.
“Protecting the public from unscrupulous business practices has always been a priority of mine during my tenure in government,” said Comrie in an email to the Queens Chronicle. “I applaud the efforts of Attorney General James and our Congressional leaders in rescinding the true lender rule which would have harmed New Yorkers, by allowing predatory lenders to charge exorbitant interest rates on loans and enable the exploitation of consumers. New York State has some of the most comprehensive consumer protection laws in the country and I am pleased to see that President Biden signed into law measures that will keep those protections in place.”
The Center for Responsible Lending, a nonprofit that works to ensure a fair and inclusive marketplace, had a coalition of 325 activist, faith, housing, labor, community, small business, veteran, senior rights, legal and consumer organizations across the country and in the District of Columbia undersign a letter to House Speaker Nancy Pelosi (D-Calif.), Senate Majority Leader Chuck Schumer (D-NY), House and Senate Minority Leaders Kevin McCarthy (R-Calif.) and Mitch McConnell (R-Ken.) to challenge the Trump policy that they dubbed the “fake lender” rule in a prepared statement on June 23.
“Rent-a-bank lending is back,” said the statement, “now being used to make longer-term installment loans at rates that exceed voter- and legislature-approved rate caps.”
Lenders would have been allowed to charge rates of 179 percent or higher, according to CRL coalition statement.
“The final rule, enacted by the OCC in October 2020, overturns 200 years of case law endorsed by the Supreme Court that allows courts to look beyond contrivances to prevent usury evasions,” said the statement.
While the coalition was reaching out to members in Congress, James had already led a lawsuit on July 29, 2020 with bipartisan support from 23 other attorneys general against the rule.
“As our state and nation continue to suffer the devastating effects of COVID-19, with millions of Americans still unemployed and struggling to make ends meet, it is reprehensible that the Trump Administration has chosen to protect big banks’ profits rather than vulnerable consumers’ wallets,” James said in a statement last year.
On July 8, she announced that the lawsuit was dropped, since under Biden’s repeal it would no longer be necessary.
“The reversal of this predatory and abusive Trump era rule is a victory for all consumers,” said James. “The true lender rule made a mockery of federal law and would have prolonged the tide of exploitative and dangerous loans that trap vulnerable consumers in cycles of debt.”