Commentary, News, Trump Administration

Federal “regulator” seeks to end NC’s ability to control predatory payday lending

Could it be that Trump administration officials and appointees sense that their time is limited and that they must act quickly to push through their parting final giveaways to bottom-feeder industries before a change in the nation’s political leadership comes in 2021?

That’s certainly the impression one gets from the latest remarkable announcement from the Office of the Comptroller of the Currency, which is currently headed by an “acting” agency head who was installed in March by Trump’s Treasury Secretary, Steve Mnuchin. The proposal would effectively eviscerate the longstanding and hard won consumer protections that states like North Carolina have put in place to regulate predatory “payday” lending.

This is from a release distributed this morning the good people at the Center for Responsible Lending:

Durham, NC — Yesterday, the Office of the Comptroller of the Currency (OCC) proposed a rule that would allow predatory lenders to partner with out-of-state banks for the purpose of evading North Carolina’s interest rate cap.

The “true lender” rule would enable the same situation that the North Carolina Banking Commissioner put a stop to in 2006. Payday lenders like Advance America were operating all over the state, charging annual interest rates up to 400%, which violated North Carolina law and trapped people in high-cost debt cycles. North Carolina currently saves $457 million per year in payday and car title fees by enforcing our consumer protections.

Payday and car title loans are marketed as quick relief for cash-strapped borrowers, but overwhelming evidence shows that the business model of these lenders is based on engaging customers in a long-term repeat cycle. Payday lenders obtain 75% of their revenue from borrowers with more than 10 loans per year.

At triple-digit interest rates, the cycle causes extreme financial distress for borrowers, who have trouble paying bills, experience bank fees that trigger bank account closures, and are more likely to file bankruptcy than similarly-situated people without payday loans.

Center for Responsible Lending (CRL) Director of North Carolina Policy Rochelle Sparko issued the following statement:

“The proposal by the OCC shows great insensitivity to the plight of essential workers and other North Carolinians, for whom predatory lending is both more dangerous and potentially more harmful than ever. Our state saw the destruction predatory lenders caused and chased them out of our borders in 2006. It would be a great shame to see them come back, set up shop in our shopping centers, and put their wealth-stripping machines back into service, especially in the communities of color where they locate most frequently and where families are devastated by the COVID-19 pandemic and its economic consequences.”

The deadline for comments to the OCC on this proposed rule is September 3, 2020. The FDIC has previously signaled interest in issuing its own proposed “true lender” rule.

CRL plans to draft a comment in August on the proposal to which individuals and organizations will be invited to lend their names. Click here to learn more and receive updates on this and related issues.

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