Providing for Congressional Disapproval of the Rule Submitted By the Office of the Comptroller of Currency Relating to ``National Banks and Federal Savings Associations As Lenders''
Floor Speech
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Ms. WATERS. Madam Speaker, pursuant to House Resolution 486, I call up the joint resolution (S.J. Res. 15) providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Office of the Comptroller of Currency relating to ``National Banks and Federal Savings Associations as Lenders'', and ask for its immediate consideration in the House.
The Clerk read the title of the joint resolution.
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Ms. WATERS. Res. 15 and to insert extraneous material thereon.
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Ms. WATERS. Madam Speaker, I yield myself such time as I may consume.
Madam Speaker, I rise today in support of S.J. Res. 15, a resolution to invalidate the Office of the Comptroller of the Currency's so-called True Lender Rule under the Congressional Review Act.
This resolution would end a dangerous Trump-era rule that would allow predatory lenders to evade State usury laws and target consumers with high interest rate loans of 150 percent or higher through sham partnerships with banks.
I would like to thank Representative Garcia from Illinois for introducing the House companion to this measure and for his leadership in fighting to protect consumers from predatory lending schemes.
My committee has held several hearings that have exposed the consumer harm that results from these rent-a-bank schemes and explored how the Trump administration's harmful rule erodes the consumer protections.
The OCC's rule undoes centuries of case law that ensured that nonbank financial institutions were subject to State interest rate caps when they partnered with banks, so long as they held the primary economic interest in a consumer loan.
Trump's OCC allowed nonbanks to launder their loans through OCC- chartered banks, as long as the bank is listed on the loan origination documents, effectively allowing nonbanks to ignore State usury laws.
Simply put, before this Trump-era rule was finalized, if a nonbank in California, which has an interest rate cap of, for example, 36 percent, wanted to make a loan to a customer in California, the nonbank can't charge more than 36 percent. OCC's True Lender Rule turns this commonsense legal doctrine on its head.
What the Trump-era rule says is that this nonbank can now partner with a national bank that is based in, for example, Utah, which doesn't have an interest rate cap, to now legally charge virtually any interest rate to the consumers in California.
This is true even if the bank in Utah has done nothing but put its name on the loan paperwork and intends to immediately transfer the loan to the nonbank in California. We have seen interest rates of more than 150 percent charged to consumers in this way.
The committee's work has shone a spotlight on heartbreaking stories of the harm that this rule has caused to consumers and small business owners. Let me give you a real-world example of a Black-owned small business that was harmed by one of these rent-a-bank schemes authorized by Trump's OCC.
A recent news report detailed the case of Carlos and Markisha Swepson, who were the owners of Boulevard Bistro, a restaurant in Harlem, New York. As they told NBC News, they took out several business loans for $67,000 and were charged a whopping 268 percent APR.
For all intents and purposes, their lender was World Business Lenders, a nonbank lender that has a partnership with Axos Bank. This is a bank in New York State. Even though the loan was made by World Business Lenders, because Axos Bank's name was on the loan documents, the nonbank could bypass the New York usury limit of 25 percent APR.
Due to the pandemic, the Swepsons are now behind on their loan payments. They are now facing foreclosure proceedings filed by World Business Lenders on a home they own that acts as collateral for the high interest rate loans. If not for Trump's rule, the Swepsons would have only been charged a 25 percent interest rate and would probably not be facing financial ruin.
If Congress lets this Trump-era rule stand, these kinds of predatory, triple-digit interest rate loans will continue to be made through these kinds of rent-a-bank schemes, and lenders will continue to take advantage of small business owners and other consumers desperate to stay afloat.
Additionally, let's not forget that during the last election, Nebraska joined 45 States and the District of Columbia that have already passed legislation to limit usury rates for small-dollar installment loans.
The Trump-era True Lender Rule is a backdoor way for nonbanks to charge triple-digit interest rates on loans at the expense of consumers in States where voters turned out to pass interest rate cap laws.
No wonder some called this the ``fake lender'' rule.
For these reasons, I urge my colleagues to support this bill. And for those who did not understand what we were talking about when we talked about the True Lender Rule, I think I have laid it out in such a way that you understand this is predatory. This is a rip-off. And for these reasons, I urge my colleagues to support this bill.
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Ms. WATERS. Madam Speaker, I yield 1 minute to the gentlewoman from California (Ms. Pelosi), the Speaker of the House of Representatives.
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Ms. WATERS. Madam Speaker, I yield 2 minutes to the gentleman from Illinois (Mr. Garcia), who is also the sponsor of the House companion to this legislation.
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Ms. WATERS. Madam Speaker, I yield 2 minutes to the distinguished gentlewoman from Michigan (Ms. Tlaib).
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Ms. WATERS. Madam Speaker, I yield 2 minutes to the gentleman from Texas (Mr. Green), who is also the chair of the Subcommittee on Oversight and Investigations.
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Ms. WATERS. Madam Speaker, I yield 1 minute to the gentlewoman from California (Ms. Porter).
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Ms. WATERS. Madam Speaker, may I inquire how much time I have remaining.
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Ms. WATERS. Madam Speaker, I yield myself such time as I may consume.
Madam Speaker, this resolution would take the necessary action to reverse the harmful Trump-era true lender rule that preys on small business owners and individuals when they need assistance the most. This rule is a back door for nonbanks to charge triple digit interest rates that trap consumers.
Last month, the Senate passed this resolution on a bipartisan vote with all Democrats voting in support. They were joined by Republican Senators Lummis, Rubio, and Collins. This resolution is also supported by more than 400 consumer, civil rights, veterans, small businesses, and other organizations, including the American Civil Liberties Union, Americans for Financial Reform, the Center for Responsible Lending, Faith for Just Lending, the NAACP, National Association of Federally- Insured Credit Unions, the National Consumer Law Center, Conference of State Bank Supervisors, and 25 State attorneys general from both red and blue States, among many others.
Madam Speaker, and Members, small businesses and underbanked consumers do not benefit from the rule. Instead, the rule allows nonbank lenders to launder loans through banks in order to charge those with limited access to credit triple digit interest rates and trap these consumers in devastating cycles of debt. These predatory rent-a- bank schemes disproportionately prey on communities of color, draining wealth from these communities and, in turn, perpetuating the racial wealth gap.
A disproportionate share of payday borrowers come from communities of color even after controlling for income. Communities of color have historically been left out of the banking system. Black and Latinx consumers are much less likely to have a checking account than White consumers, which is typically a requirement for a payday loan. About 17 percent of Black and 14 percent of Latinx households are unbanked compared to 3 percent of White households.
Payday lenders target communities of color. The communities most affected by redlining are the same who are saturated by payday lenders today, which are more likely to locate in more affluent communities of color than in less affluent White communities.
One borrower, a single mother living below the poverty line from California, submitted a complaint to the CFPB about Elevate's RISE.
``I was misled by RISE Credit to believe that they were unlike other predatory loan companies. By the time,'' she says, ``I understood what I had signed, I had paid them thousands of dollars in interest.
``I have recently become temporarily unemployed and called them to ask for help during my time of financial hardship. They refused any solution and my account is headed to collections now.
``The total paid is far over the amount initially borrowed from RISE. This is robbery, and all of the necessities I have for myself and my children are suffering because of it.
``How is it that they can do this? I am asking for help for not only my family, but for all of the families targeted by these predatory loans meant to target those living in poverty and struggling to live paycheck to paycheck.''
The fake lender rule protects lenders that not only destroy small businesses but also threaten to take business owners' homes.
In New York, Jacob Adoni, a realtor, has been facing foreclosure threats on a $90,000 loan with an interest rate of 138 percent APR.
In a court case--that is Adoni et al. v. World Business Lenders, LLC, Axos Bank and Circadian Funding filed in New York in October 2019-- Adoni said he received threats that the lender would foreclose on his home after receiving a $90,000 loan at 138 percent APR, secured by his personal residence.
``Adoni was contacted by Circadian Funding with an offer of a personal loan that would be funded by WLB and Axos Bank. He was told that the loan documents would be provided to him at 12 p.m. and he must execute them by 6 p.m. or the offer would no longer be valid.
``Adoni was told by Circadian that the loan was meant to be a personal loan to him, but it was necessary for the loan documents to make reference to his business.''
He has received multiple threats to foreclose on his home and the mortgage.
Madam Speaker, let me just respond to some of what I have heard from the opposite side of the aisle. I am absolutely overcome by the great interest that my Republican colleagues have in helping minorities. I am so moved about the fact that all this is about helping minorities who have been put into trouble because they are subprime lenders. Now if they are, it is because they were the victim of predatory lenders who put them in a subprime position.
But I hardly think that this is all about taking care of minorities and these small businesses. This is about protecting the big banks. This is about protecting the national banks. You heard what the ranking member said. The big national banks have been in business for years, and we ought to let them operate the way that they have historically operated and not interfere with them.
I don't know where they get away with protecting these big national banks. And the constituents in their own district who are being misused because they happen to get money, money that was lent to them by a nonbank, and that nonbank partnered with a national bank, they are now having to pay the interest rates of another State, perhaps--like it was explained in California, why we have usury laws and there is a cap on those interest rates.
When they do this kind of partnering, it is all about getting to a State where they are made to pay whatever that big bank is allowed to collect from them.
Madam Speaker, this is a rip-off. This is about hurting the people who most need our help. This is about allowing this partnering to go on. And many of those people who are borrowing from these payday lenders and other nonbanks don't even know that they are going to be the victims of the big banks and the interest rates that they charge. This is absolutely ridiculous, and there is not a credible argument from the other side of the aisle about why they should disadvantage these minorities and small businesses that they claim that they are protecting. This is outrageous.
Madam Speaker, I am so pleased that the Senate passed this bill. And I am so pleased that the Republicans on the other side of the aisle-- not on the other side of the aisle, on the other side of Congress-- decided to join with the Democrats in order to do the right thing on behalf of our constituents.
Madam Speaker, when they talk about, Oh, this is just because they didn't like Trump and they want to undo whatever he has done, that is their talking point for the day. This is not about that.
This committee, the Committee on Financial Services, is a new and different kind of committee. We are not owned by the banks. We are not here to protect the big banks and the national banks. We are here because we are here to take care of what is right and what is fair. And this committee is not going to be about the business of ripping off the least of these.
Madam Speaker, I yield back the balance of my time.
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