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Attorneys General Sue to Stop Potential End-Run Around State Usury Laws

  • California AG Xavier Becerra, Illinois AG Kwame Raoul, and New York AG Letitia James sued the Office of the Comptroller of the Currency (“OCC”) 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.
  • The complaint, which seeks declaratory and injunctive relief, alleges that the new rule would help shield predatory lenders like payday, car title, and installment lenders, and facilitate “rent-a-bank” schemes in which national banks could enter into sham partnerships with unregulated entities in order to evade state usury laws. The complaint also alleges that the rule exceeds the OCC’s authority under the National Bank Act and that the OCC failed to follow the analysis and observation procedures required to implement a rule preempting state consumer protection laws.
  • As previously reported, the plaintiff AGs led a bipartisan group of 23 AGs in submitting a comment letter opposing the rule prior to its enactment by the OCC.