Letter to the OCC regarding proposed changes to lender rules
September 3rd, 2020
Office of the Comptroller of the Currency (OCC)
Comments regarding Docket ID OCC–2020–0026
Dear Acting Director of the OCC Brian Brooks,
We, the undersigned, are writing to indicate our opposition to the Office of the Comptroller of the Currency’s (OCC) proposed rule that would allow national banks to partner with non-bank lenders to make consumer loans at interest rates above Colorado’s limits.
In November, 2018, 77% of Colorado voters approved Proposition 111, which placed a 36% APR cap on payday loans. It passed in every single county but two. In addition, Colorado also limits the APR on two-year, $1,000 loans at 36%. Coloradans are clear - predatory lending products have no business in Colorado.
Unfortunately, your proposed rule is a type of loan laundering that would enable non-bank lenders to circumvent our state laws and make consumer loans that exceed our state’s limits.
Here’s how this proposal undermines Colorado law. A non-bank lender, which would normally have to abide by Colorado’s limits if they were making the loan, would be allowed to identify Colorado customers and get loan applications filled out and then send the applications to a national bank. That bank would then be allowed to send the consumer the money for the loan but quickly sell the loan back to the non-bank lender for a fee and the non-bank lender would then administer the loan and collect the fees and interest. By “renting the bank” in this way, the non-bank lender would not have to follow our state rate cap rules and could charge APR’s of 100% or more.
This is a “rent-a-bank” proposal - the non-bank lender is essentially paying the out-of-state bank to rent its charter. The lender uses this arrangement to buy the ability to ignore the interest rate caps of the states like Colorado in which they want to operate.
We would oppose this proposal during good economic times. But it is a particularly bad idea during the COVID pandemic when so many of our neighbors and loved ones are struggling economically. Right now, high-cost predatory lending is more dangerous than ever. People need solid, responsible resources that will help get them through.
This rule would not provide good credit options to underserved communities. It will open the door to high-cost debt traps that drain wealth rather than build it - the exact kind of predatory products Coloradans rejected when they approved our 36% payday APR caps by a wide margin.
We agree with you that action is needed during these extremely difficult times when so many Coloradans are in danger of going hungry, losing their homes, and closing their small businesses. We call on you to focus your attention on proven financial empowerment strategies like expanded access to safe and affordable banking, increased access to safe, affordable credit based on the borrower’s ability to repay, free individual financial coaching, community wealth-building strategies, and strong consumer protections.
The OCC should build upon the consumer protections that states like Colorado have put into place not widen loopholes that bring back predatory lending products our state has roundly rejected.
Please table plans to gut the so-called “true lender” doctrine, which is a longstanding anti-evasion provision critical to enforcing state interest rate limits against high-cost predatory lenders.
Sincerely,
Colorado Organizations and Businesses
Danny Katz, Colorado Public Interest Research Group (CoPIRG)
Scott Wasserman, The Bell Policy Center
Leanne D Wheeler, Veterans of Foreign Wars Post 1
Rosemary Lytle, NAACP Colorado Montana Wyoming State Area Conference
Carmen Medrano, United for a New Economy
Simone Renee, Royal Executive Partnerships
Barbara Freeman, MANAUS - LaMedichi
Josh Downey, Denver Area Labor Federation, AFL-CIO
Morgan Royal, New Era Colorado
Lizeth Chacon, Colorado People's Alliance (COPA)
Maria Gonzalez, Adelante Community Development
T. A. Taylor-Hunt, National Association of Consumer Advocates Colorado
Dennis Dougherty, Colorado AFL-CIO
Karen Moldovan, Good Business Colorado
Mike Kromrey, Together Colorado
Kyra deGruy Kennedy, Young Invincibles
Lauren Martens, SEIU Colorado
Carlos Valverde, Colorado Working Families Party
Jice Johnson, Black Business Initiative, PBC
Julie Reiskin, Colorado Cross-Disability Coalition
Jordan Bailey, Philanthropiece
Tiffani Lennon, Colorado Center on Law and Policy
Peter Severson, Lutheran Advocacy Ministry-Colorado
Robert Brocker, Colorado Senior Lobby
Jeff Kinsey, The Logos Group
Magenta Freeman, DigiMarkPM
Colorado General Assembly Members
Steve Fenberg, State Senator and Majority Leader
Dominick Moreno, State Senator
Faith Winter, State Senator
Julie Gonzales, State Senator
Brittany Pettersen, State Senator
Tammy Story, State Senator
Dominique Jackson, State Representative
Mike Weissman, State Representative
Adrienne Benavidez, State Representative
Janet Buckner, State Representative
Yadira Caraveo, State Representative
Emily Sirota, State Representative
Kerry Tipper, State Representative
Jonathan Singer, State Representative
Chris Kennedy, State Representative
Serena Gonzales-Gutierrez, State Representative
Brianna Titone, State Representative
Daneya Esgar, State Representative
Steven Woodrow, State Representative