24 Democratic Attorneys General Object to Proposed Banking Rule, Alleging It Will Allow “Rent-a-Bank” Schemes

  • A group of 24 Democratic AGs, led by Minnesota AG Keith Ellison, New York AG Letitia James, and North Carolina AG Josh Stein, sent a comment letter to the Comptroller of the Currency objecting to a proposed federal rule titled “National Banks and Federal Savings Associations as Lenders,” arguing that it would undermine States’ usury laws, which deter predatory lending.
  • The letter notes that the proposed rule will replace state true-lender standards, currently employed by courts to determine whether state interest rate caps should be applied to a particular loan, with a bright-line federal standard that will accept a national bank’s name on a loan as conclusive evidence that the bank is the true lender, and that therefore the loan is not subject to a state’s interest rate caps. The letter argues that the proposed rule will allow predatory lenders to enter into “rent-a-bank” schemes enabling them to circumvent state usury laws and interest rate caps.
  • As previously reported, California AG Xavier BecerraIllinois AG Kwame Raoul, and New York AG Letitia James recently sued the Office of the Comptroller of the Currency to strike down a new rule titled “Permissible Interest on Loans That Are Sold, Assigned, or Otherwise Transferred,” which went into effect on August 3, 2020 and provides that when a bank sells, assigns, or otherwise transfers a loan, the interest permissible prior to the transfer remains in effect following the transfer.