[Congressional Record Volume 167, Number 110 (Thursday, June 24, 2021)]
[House]
[Pages H3099-H3110]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 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''

  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

[[Page H3100]]

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.
  The SPEAKER pro tempore. Pursuant to House Resolution 486, the joint 
resolution is considered read.
  The text of the joint resolution is as follows:

                              S.J. Res. 15

       Resolved by the Senate and House of Representatives of the 
     United States of America in Congress assembled, That Congress 
     disapproves the rule submitted by the Office of the 
     Comptroller of Currency relating to ``National Banks and 
     Federal Savings Associations as Lenders'' (85 Fed. Reg. 68742 
     (October 30, 2020)), and such rule shall have no force or 
     effect.

  The SPEAKER pro tempore. The joint resolution shall be debatable for 
one hour, equally divided and controlled by the chair and ranking 
minority member of the Committee on Financial Services or their 
respective designee.
  The gentlewoman from California (Ms. Waters) and the gentleman from 
North Carolina (Mr. McHenry) each will control 30 minutes.
  The Chair recognizes the gentlewoman from California.


                             General Leave

  Ms. WATERS. Madam Speaker, I ask unanimous consent that all Members 
may have 5 legislative days within which to revise and extend their 
remarks on S.J. Res. 15 and to insert extraneous material thereon.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentlewoman from California?
  There was no objection.
  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.
  Madam Speaker, I reserve the balance of my time.
  Mr. McHENRY. Madam Speaker, I yield myself such time as I may 
consume.
  Madam Speaker, I rise in strong opposition to this resolution.
  Earlier this week, President Biden met with financial regulators. 
From the four-sentence recap released by the White House, we know one 
of the topics they discussed was ``promoting financial inclusion and 
responsibly increasing access to credit.''
  I agree with that concept, and I think we should all agree with that 
concept. Unfortunately, my Democrat colleagues here in the House and 
the Senate don't seem to be on the same page with the Biden 
administration. This resolution we are considering today would actually 
make financial services more expensive and credit less available to 
consumers and to small businesses and families across the country.
  So why are my Democrat colleagues strong-arming this resolution 
through Congress?
  Well, the answer is pretty simple. It is politics. That is what it 
is. Let's call this what it is. It is blue States and their leftwing, 
so-called consumer protection advocates who want to, again, limit the 
reach of national banks and partnerships under the guise of ``consumer 
protection.''
  Democrats are more interested in scoring political points with 
leftwing activists than supporting the borrowers and small businesses 
that this OCC True Lender Rule helps.

                              {time}  1330

  We have witnessed Democrats work for decades to limit the scope of 
national banks through one measure or another.
  The National Bank Act was signed into law in 1864. We have national 
banks. We have had national banks for 157 years in this country similar 
to today. What they are striking at is opposition to what we have lived 
with for over 157 years of well-regulated national banks doing business 
across the country.

[[Page H3101]]

  The left, my colleagues on the opposite side of the aisle, will 
provide misleading statements about interest rates and spurious 
arguments about State versus Federal regulation. They will argue 
consumers are harmed and this so-called partisan rule that they are 
driving invites bad banking practices.
  Above all else, my colleagues across the aisle see this as an 
opportunity to rebuke the last administration, simply because they 
don't like the former President. I understand that. There is plenty of 
debate about that. But we should not tinker with existing law that is 
longstanding and predates this President or any other President. We 
should be talking about the contents of that law.
  I would like to remind my friends as well that it was the Obama 
administration who supported the risk-management principles underlying 
the true lender rule. It was an effort to regulate, to ensure that 
instead of having shadow banking provide these services, that you have 
well-regulated consumer protection laws at the Federal level as a part 
of this process.
  So once again, we have the opportunity to come together to support 
good, bipartisan policy, rather than doing what the Democrats would 
rather do, which is appease the woke left.
  So let's stop the political theatrics and talk about what the true 
lender rule actually does, not what my Democrat colleagues claim it 
does.
  The rule specifies that when a bank makes a loan, the bank is the 
true lender if, as of the date of origination, it is named as the 
lender in the loan agreement or funds the loan. That loan would be 
regulated by the entity making the loan, funding the loan, and the 
regulation would fall upon them. So the consumers have Federal consumer 
protection laws that would act on that loan. That is what it does.
  My friends that created the Consumer Protection Bureau, I thought you 
wanted that, and yet you are arguing against that with this rule today. 
It is pretty straightforward; it is a pretty straightforward law. It 
shouldn't be political.
  This rule also clarifies that as the true lender of a loan, a bank 
holds the responsibility of complying with Federal law. This eliminates 
the greatest risk associated with abuse of rent-a-charter schemes, 
which we agree are bad, and I think we could be doing something about 
that rather than this spurious argument we have today.
  In October of last year, the OCC finalized the true lender rule that 
is being debated today. This was a second step in a decades-long 
process to clarify the bank-third-party relationship when issuing a 
loan. It has been longstanding practice, but there have been lawsuits, 
a great deal of uncertainty about it, a lot of questions in particular 
jurisdictions around the country on the nature of those partnerships, 
and it clarifies those partnerships in a rules-based regime.
  This legal clarity enables bank and fintech partnerships to provide 
their customers with the financial products they want and need.
  Consider this: According to the New York Federal Reserve, one in four 
African-American-owned firms used fintechs to access PPP loans, one in 
four. And they did so using this legal doctrine that enabled that to 
happen in partnerships with national banks.
  Technology helps create greater financial inclusion. So why are my 
Democrat colleagues so afraid of technology, so afraid of innovation?
  Per usual, my Democrat colleagues are willing to ignore facts in 
favor of myths that back up their preferred narrative. That is 
unfortunate, especially for something this important.
  The left likes to say that banks can charge whatever interest rate 
they want. That is simply not true. Federal law gives national banks 
and Federal savings associations the same authority that State banks 
have regarding exportation of interest rates.
  Now, both Federal- and State-chartered banks must conform to 
applicable interest rate limits in those States. States retain the 
authority to set interest rates, which varies from State to State.
  Here is another myth: Third-party bank partnerships will use this 
rule to skirt State supervision and usury laws. Simply not true.
  The truth is, banks primarily partner with third parties to reach 
additional markets, benefiting from a particular expertise or 
technology to improve their efficiency. Partnerships with third parties 
do not change the bank's authority or expose interest rate 
differentials.
  And last, but not least, progressive activists cite the interest rate 
as a real problem with the true lender rule. They are pushing a 36 
percent best rate cap. They have even pushed it at the national level. 
The math simply doesn't back up this falsehood.
  The true lender rule was not some sinister plan by the previous 
administration to trick borrowers. It was not. It simply was not the 
case. This legal principle was established in 1864 with the National 
Bank Act. It is being undermined by an attempt at politics rather than 
sound policy, and what we should support is good, bipartisan policy 
that provides clarity to banks and fintechs so they can better serve 
our constituents and the consumers of America. That is it.
  We have a well-regulated banking system. We do. It is not perfect. We 
have States that have various laws that are operable in their States, 
but we also have a national system here as well.
  We have worked harmoniously, not perfectly, over the last 157 years 
since we established the national banking system. But why undermine a 
key principle of that national banking system by spurious arguments 
that actually don't have to do with the true lender rule? They don't. 
There are other elements that the left opposes that actually, on a 
bipartisan basis, we oppose, but the true lender rule is not it.

  It is a question of whether or not the bank that is providing you the 
loan is, in fact, the true lender. That is it. It is not fancier than 
that, people. That is what it is. That is what we are arguing about 
today, and that is kind of the absurdity of this stuff that we are 
debating right now, because it is that simple.
  So let's promote financial inclusion the way that the President 
outlined, which was promoting financial inclusion, making rates more 
competitive and the cost of credit cheaper for individuals. Let's do 
that. Let's oppose this resolution before us so we can have sound 
principles, so we can drive that inclusion that is necessary and very 
important.
  Madam Speaker, I reserve the balance of my time.
  Ms. WATERS. Madam Speaker, I yield 1 minute to the gentlewoman from 
California (Ms. Pelosi), the Speaker of the House of Representatives.
  Ms. PELOSI. Madam Speaker, I thank the gentlewoman for her leadership 
in bringing this important legislation, more than one piece of 
legislation, to the floor today.
  As I rise to speak in support of reversing the anti-consumer fake 
lender rule pushed through in the final weeks of the previous 
administration, I just want to take a moment to put it in perspective.
  Madam Speaker, in November, the people elected Democratic majorities 
in the Congress that would be for the people, fighting for the public 
interests, not the special interests.
  To that end, they elected majorities that would reverse the damage 
inflicted on their health and financial security by the last 
administration.
  That mission is why the House this week is passing legislation under 
the Congressional Review Act to reverse three of the past President's 
most egregious assaults on families' well-being.
  The Congressional Review Act is one of Congress' most important tools 
to reassert the power of the people's House to deliver for the people 
and to reclaim our authority under the Constitution, upholding the 
balance of powers that is the foundation of our American democracy.
  With the gentlewoman's permission, I wish to speak to the anti-
consumer fake lender rule, but also speak to two other issues under the 
Congressional Review Act this afternoon.
  On the floor today is legislation, again, to reverse the anti-
consumer fake lender rule pushed through in the final weeks of the 
previous administration.
  This fake lender rule greenlights rent-a-bank schemes in which 
predatory lenders evade bank interest rate limits to swindle vulnerable 
consumers. This is done by putting a bank

[[Page H3102]]

name on loan paperwork and claiming that the bank, not the predatory 
lender, issued the loan.
  To take one example, in California, where the interest rate on a 2-
year $2,000 loan is capped at 25 percent, lenders can use rent-a-bank 
partnerships to make loans with rates up to 225 percent.
  This bipartisan resolution to end the fake lender rule is supported 
by many: a bipartisan coalition of 25 State attorneys general; faith 
leaders, including the National Latino Evangelical Coalition, the 
National Association of Evangelicals, the National Baptist Convention 
USA, hundreds of banking law and consumer finance regulation scholars, 
and Americans across the country and across parties, urging us to 
support this Congressional Review Act reversal of the anti-consumer 
fake lender rule.
  Also today, we are considering legislation to undo the antiworker, 
pro-discrimination rule forced through in the final week of the past 
administration.
  The EEOC was established to protect working people from 
discrimination and ensure that discrimination charges are resolved 
fairly. But this rule would impose draconian new obligations that bias 
the conciliation process against employees, toward employers; escalate 
the potential for retaliation, because retaliation claims make up half 
of EEOC's charges filed at the EEOC last year; siphon off scarce EEOC 
resources and saddle the EEOC with wasteful collateral litigation, 
prolonging harm to workers through delays; and contravene both the 
Supreme Court precedent and Congressional intent.
  This month, civil rights and workers' rights organizations wrote to 
Congress in support of S.J. Res. 13, writing: ``The EEOC must be able 
to conduct its work efficiently . . . to prevent and remedy workplace 
discrimination.
  ``This mission is even more critical in the middle of a global 
pandemic that continues to have severe economic repercussions for 
women, people of color, and other marginalized communities.

  ``The final rule will only deepen the barriers working people face 
coming forward to report discrimination and obtain justice.''
  This Congressional Review Act legislation passed the Senate. 
Hopefully, it will pass the House today.
  Finally, tomorrow we take up bipartisan legislation that paves the 
way to restore the Obama-era protections against harmful methane 
pollution, which the most recent past President rolled back.
  Briefly, these safeguards are key protections for public health that 
will also make a serious difference in combating the climate crisis. 
Methane is responsible for at least one-quarter of the warming of the 
planet. And it is 25 times more potent than carbon dioxide in trapping 
heat in the atmosphere.
  This resolution passed on a bipartisan basis in the Senate and in the 
Energy and Commerce Committee. It builds on the commitment of the 
President and the Democratic Congress to tackle the climate crisis.
  As the administration has stated, addressing methane pollution is an 
urgent and essential step.
  Madam Speaker, with that, as Speaker, I am proud to be able to use 
the Speaker's prerogative to speak beyond the item on the floor right 
now.
  I am proud to support these important actions to reverse the Trump 
damage and to deliver results that make a difference in the lives of 
hardworking American families.
  I thank all of our leaders for this legislation for the people: Chair 
 Bobby Scott and Representative Suzanne Bonamici on the EEOC 
resolution; Representative Chuy Garcia for his work on the true lender 
resolution; Representative Diana DeGette and Chairman Frank Pallone, 
and many others, on the methane resolution from the Energy and Commerce 
Committee.
  I urge strong votes for S.J. Res. 13, 14, and 15.
  Coming back to the resolution on the floor right now, I thank the 
distinguished chair of the Financial Services Committee for her 
leadership in looking out always for the consumer, for competition, for 
fairness, for the people.

                              {time}  1345

  Mr. McHENRY. Madam Speaker, I yield 3 minutes to the gentleman from 
Missouri (Mr. Luetkemeyer), who is the ranking member on the Consumer 
Protection and Financial Institutions Subcommittee of the Financial 
Services Committee, and also the ranking member on the Small Business 
Committee.
  Mr. LUETKEMEYER. Madam Speaker, I rise today to discuss S.J. Res. 15, 
House Democrats' attempt to limit the ability of our Nation's banks to 
serve consumers by overturning the true lender rule.
  The true lender rule was finalized by the OCC in 2020, in an effort 
to clarify who was the true lender in national bank third-party 
relationships. By providing this clarity, these third-party entities 
were able to provide financial services in partnership with financial 
institutions with the protections of legal precedence.
  Partnering with third parties like fintechs gives financial 
institutions the ability to increase access to credit, especially for 
low- and moderate-income consumers and small businesses.
  Unfortunately, the bill before us is nothing more than a politically 
motivated attempt by Democrats to make it more expensive and difficult 
for banks to serve customers, and its passage will have long-term 
consequences.
  According to the Congressional Review Act, if this legislation is 
passed, the OCC will not have the ability to issue a similar rule down 
the road. This will leave bank-fintech partnerships in limbo with a 
great deal of uncertainty regarding the loans they make and who is the 
true lender in the relationship.
  Democrats are constantly putting their disdain for America's banks 
ahead of the needs of their constituents, and this bill is another 
prime example of this unfortunate practice.
  I firmly oppose this bill and its prevention of widespread financial 
inclusion, especially for low- and moderate-income consumers.
  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.
  Mr. GARCIA of Illinois. Madam Speaker, I rise in strong support of 
S.J. Res. 15, a resolution to repeal the OCC's so-called true lender 
rule.
  Earlier this year, my State, Illinois, passed a law that protects our 
consumers from predatory, high-interest loans. Eighteen other States 
have done the same.
  I introduced the House version of this resolution because the true 
lender rule undermines laws like ours, laws that keep working-class 
people out of cycles of debt they can't pay back.
  The rule is a rubber stamp for rent-a-bank schemes, where a lender 
can dodge State law by having a bank's name on the loan paperwork. That 
is all. No skin in the game, no investment in our communities; just a 
name on the paperwork.
  This rule doesn't encourage innovation. It encourages playing games. 
This isn't a partisan issue. As a matter of fact, last year, 82 percent 
of Nebraska voters joined States like Arkansas and South Dakota to 
protect their communities from unpayable debt, and this rule from the 
OCC provides bad actors with a new tool to ignore them.
  So a broad coalition of over 400 organizations--rural, urban, 
suburban--have come together in support of this measure, and they 
include consumer advocates, labor advocates, veterans, credit unions, 
and many other actors, including evangelical congregations.
  Madam Speaker, I urge this body to pass this resolution and empower 
working-class communities like mine that are targeted by predatory 
lenders, and voters across the country who support consumer 
protections.
  Mr. McHENRY. Madam Speaker, I yield myself such time as I may 
consume.
  Madam Speaker, I would reference my colleagues the Federal Code, the 
Federal Register, that actually has the contents of this rule.
  Madam Speaker, I include in the Record the actual rule that we are 
debating here, and I would highlight one piece in particular.
  ``The OCC agrees that rent-a-charter schemes have no place in the 
Federal financial system but disagrees that this rule facilitates such 
schemes. As noted above, instead, this proposal would help solve the 
problem by (1) providing a clear and simple test for determining when a 
bank makes a loan and (2) emphasizing the robust supervisory framework 
that applies to any

[[Page H3103]]

loan made by a bank and to all third-party relationships to which banks 
are a party. As noted above, if a bank fails to satisfy its obligations 
under this supervisory framework, the OCC will use all the tools at its 
disposal, including its enforcement authority.''
     DEPARTMENT OF THE TREASURY
     Office of the Comptroller of the Currency
     12 CFR Part 7
     [Docket ID OCC-2020-0026]
     RIN 1557-AE97
     National Banks and Federal Savings Associations as Lenders
       AGENCY: Office of the Comptroller of the Currency, 
     Treasury.
       ACTION: Final rule.
       SUMMARY: The Office of the Comptroller of the Currency 
     (OCC) is issuing this final rule to determine when a national 
     bank or Federal savings association (bank) makes a loan and 
     is the ``true lender,'' including in the context of a 
     partnership between a bank and a third party, such as a 
     marketplace lender. Under this rule, a bank makes a loan if, 
     as of the date of origination, it is named as the lender in 
     the loan agreement or funds the loan.
       DATES: The final rule is effective on December 29, 2020.
     SUPPLEMENTARY INFORMATION:
     I. Background
       Lending partnerships between national banks or Federal 
     savings associations (banks) and third parties play a 
     critical role in our financial system. These partnerships 
     expand access to credit and provide an avenue for banks to 
     remain competitive as the financial sector evolves. Through 
     these partnerships, banks often leverage technology developed 
     by innovative third parties that helps to reach a wider array 
     of customers. However, there is often uncertainty about how 
     to determine which entity is making the loans and, therefore, 
     the laws that apply to these loans. This uncertainty may 
     discourage banks from entering into lending partnerships, 
     which, in turn, may limit competition, restrict access to 
     affordable credit, and chill the innovation that can result 
     from these relationships. Through this rulemaking, the Office 
     of the Comptroller of the Currency (OCC) is providing the 
     legal certainty necessary for banks to partner confidently 
     with other market participants and meet the credit needs of 
     their customers.
       However, the OCC understands that there is concern that its 
     rulemaking facilitates inappropriate `rent-a-charter' lending 
     schemes--arrangements in which a bank receives a fee to 
     `rent' its charter and unique legal status to a third party. 
     These schemes are designed to enable the third party to evade 
     state and local laws, including some state consumer 
     protection laws, and to allow the bank to disclaim any 
     compliance responsibility for the loans. These arrangements 
     have absolutely no place in the federal banking system and 
     are addressed by this rulemaking, which holds banks 
     accountable for all loans they make, including those made in 
     the context of marketplace lending partnerships or other loan 
     sale arrangements.
       On July 22, 2020, the OCC published a notice of proposed 
     rulemaking (proposal or NPR) to determine when a bank makes a 
     loan. Under the proposal, a bank made a loan if, as of the 
     date of origination, it (1) was named as the lender in the 
     loan agreement or (2) funded the loan.
       As the proposal explained, federal law authorizes banks to 
     enter into contracts, to make loans, and to subsequently 
     transfer these loans and assign the loan contracts. The 
     statutory framework, however, does not specifically address 
     which entity makes a loan when the loan is originated as part 
     of a lending partnership involving a bank and a third party, 
     nor has the OCC taken regulatory action to resolve this 
     ambiguity. In the absence of regulatory action, a growing 
     body of case law has introduced divergent standards for 
     resolving this issue, as discussed below. As a result of this 
     legal uncertainty, stakeholders cannot reliably determine the 
     applicability of key laws, including the law governing the 
     permissible interest that may be charged on the loan.
       This final rule establishes a clear test for determining 
     when a bank makes a loan, by interpreting the statutes that 
     grant banks their authority to lend. Specifically, the final 
     rule provides that a bank makes a loan when it, as of the 
     date of origination, (1) is named as the lender in the loan 
     agreement or (2) funds the loan.
     II. Overview of Comments
       The OCC received approximately 4,000 comments on the 
     proposal, the vast majority of which were from individuals 
     using a version of one of three short form letters to express 
     opposition to the proposal. Other commenters included banks, 
     nonbank lenders, industry trade associations, community 
     groups, academics, state government representatives, and 
     members of Congress.
       Commenters supporting the proposal stated that the judicial 
     true lender doctrine has led to divergent standards and 
     uncertainty concerning the legitimacy of lending partnerships 
     between banks and third parties. They also stated that, by 
     removing the uncertainty, the OCC would help ensure that 
     banks have the confidence to enter into these lending 
     relationships, which provide affordable credit to consumers 
     on more favorable terms than the alternatives, such as pawn 
     shops or payday lenders, to which underserved communities 
     often turn. Supporting commenters also observed that the 
     proposal would enhance a bank's safety and soundness by 
     facilitating its ability to sell loans. These commenters also 
     noted that the proposal (1) makes clear that the OCC will 
     hold banks accountable for products with unfair, deceptive, 
     abusive, or misleading features that are offered as part of a 
     relationship and (2) is consistent with the OCC's statutory 
     mission to ensure that banks provide fair access to financial 
     services.
       Commenters opposing the proposal stated that it would 
     facilitate so-called rent-a-charter schemes, which would 
     result in increased predatory lending and disproportionately 
     impact marginalized communities. Other opposing commenters 
     stated that the proposal is an attempt by the OCC to 
     improperly regulate nonbank lenders, a role they consider to 
     be reserved exclusively to the states. Opposing commenters 
     also asserted that the OCC did not have sufficient legal 
     authority to issue the proposal and that the proposal 
     violated the Administrative Procedure Act (APA) and 12 U.S.C. 
     25b.
       Both supporting and opposing commenters recommended 
     changes. These recommendations included (1) adopting a test 
     that requires the true lender to have a predominant economic 
     interest in the loan; (2) providing additional ``safe 
     harbor'' requirements to enhance consumer protections (e.g., 
     interest rate caps); (3) clarifying that certain traditional 
     bank lending activities do not fall under the funding prong 
     of the rule (e.g., indirect auto lending and mortgage 
     warehouse lending); (4) providing additional details on how 
     the OCC would supervise these relationships; and (5) stating 
     that the rule will not displace certain federal consumer 
     protection laws and regulations.
       The comments are addressed in greater detail below.
     III. Analysis
       As noted in the prior section, commenters raised a variety 
     of issues for the OCC's consideration. These are discussed 
     below.
     A. OCC's Authority To Issue the Rule
       Some commenters argued the OCC lacks the legal authority to 
     issue the rule because it would contravene the unambiguous 
     meaning of 12 U.S.C. 85. These commenters believe that 
     section 85 incorporates the common law of usury as of 1864, 
     which they view as requiring courts to look to the substance 
     rather than the form of a transaction. In a similar vein, 
     commenters argued that section 85 incorporates all usury laws 
     of a state, including its true lender jurisprudence. One 
     commenter also argued that the proposal contradicts judicial 
     and administrative precedent interpreting sections 85 and 86.
       The OCC disagrees. The rule interprets statutes that 
     authorize banks to lend--12 U.S.C. 24, 371, and 1464(c)--and 
     clarifies how to determine when a bank exercises this lending 
     authority. The OCC has clear authority to reasonably 
     interpret these statutes, which do not specifically address 
     when a bank makes a loan.
       Banks do not obtain their lending authority from section 85 
     or 12 U.S.C. 1463(g). Nor are these statutes the authority 
     the OCC is relying on to issue this rule. The proposal 
     referenced sections 85 and 1463(g) in the regulatory text to 
     ensure that interested parties understand the consequences of 
     its interpretation of sections 24, 371, and 1464(c), 
     including that this rulemaking operates together with the 
     OCC's recently finalized `Madden-fix' rulemaking. When a bank 
     makes a loan pursuant to the test established in this 
     regulation, the bank may subsequently sell, assign, or 
     otherwise transfer the loan without affecting the permissible 
     interest term, which is determined by reference to state law.
       Other commenters questioned the OCC's authority on 
     different grounds. Some asserted the OCC lacks authority to 
     (1) exempt nonbanks from compliance with state law or (2) 
     preempt state laws that determine whether a loan is made by a 
     nonbank lender. One commenter also asserted that the proposal 
     is an attempt by the OCC to interpret state law. A commenter 
     further argued that the OCC's statutory interpretation is not 
     reasonable, including because the proposal (1) would allow 
     nonbanks to enjoy the benefits of federal preemption without 
     submitting to any regulatory oversight and (2) violates the 
     presumption against preemption, especially in an area of 
     historical state police powers like consumer protection.
       This rulemaking does not assert authority over nonbanks, 
     preempt state laws applicable to nonbank lenders, or 
     interpret state law. It interprets federal banking law and 
     has no direct applicability to any nonbank entity or 
     activity. Rather, in identifying the true lender, the rule 
     pinpoints key elements of the statutory, regulatory, and 
     supervisory framework applicable to the loan in question. As 
     noted in the proposal, if a nonbank partner is the true 
     lender, the relevant state (and not OCC) would regulate the 
     lending activity, and the OCC would assess the bank's third-
     party risk management in connection with the relationship 
     itself.
       Furthermore, because commenters expressed concern that this 
     rule would undermine state usury caps, it is also important 
     to emphasize that sections 85 and 1463(g) provide a choice of 
     law framework for determining which state's law applies to 
     bank loans and, in this way, incorporate, rather than 
     eliminate, state law. These statutes require that a bank 
     refer to, and comply with, the usury cap established by the 
     laws of the state where the bank is located. Thus, 
     disparities between the usury caps applicable to

[[Page H3104]]

     particular bank loans result primarily from differences in 
     the state laws that impose these caps, not from an 
     interpretation that section 85 or 1463(g) preempt state law.
       A commenter also asserted that the OCC's interpretation is 
     not reasonable because it (1) does not solve the problem it 
     claims to remedy, arguing that the proposal itself is unclear 
     and requires banks to undertake a fact-specific analysis and 
     (2) departs from federal cases holding that state true lender 
     law applies to lending relationships between banks and 
     nonbanks.
       The OCC believes that this rule provides a simple, bright-
     line test to determine when a bank has made a loan and, 
     therefore, is the true lender in a lending relationship. The 
     only required factual analysis is whether the bank is named 
     as the lender or funds the loan. The OCC has evaluated 
     various standards established by courts and has determined 
     that a clear, predictable, and easily administrable test is 
     preferable. This test will provide legal certainty, and the 
     OCC's robust supervisory framework effectively targets 
     predatory lending, achieving the same goal as a more complex 
     true lender test.
       Several commenters also asserted that the proposal 
     contravenes 12 U.S.C. 1, which charges the OCC with ensuring 
     that banks treat customers fairly. One commenter also argued 
     that the proposal is inconsistent with the Community 
     Reinvestment Act (CRA) because it encourages predatory 
     lending. As the OCC explained in the proposal, the rule's 
     purpose is to provide legal certainty to expand access to 
     credit, a goal that is entirely consistent with the agency's 
     statutory charge to ensure fair treatment of customers and 
     banks' statutory obligation to serve the convenience and 
     needs of their communities.
     B. 12 U.S.C. 25b
       Several commenters asserted that the agency should have 
     complied with 12 U.S.C. 25b, which applies when the OCC 
     issues a regulation or order that preempts a state consumer 
     financial law. Some of these commenters argued that the 
     proposal fails to meet the preemption standard articulated in 
     Barnett Bank of Marion County, N.A. v. Nelson, Florida 
     Insurance Commissioner, et al. (Barnett), as incorporated 
     into section 25b. Commenters also argued that (1) section 
     25b(f) does not exempt the OCC's proposal from the 
     requirements of section 25b because the rule is not limited 
     to banks charging interest and (2) the proposal undermines or 
     contravenes section 25b(h) because it extends preemptive 
     treatment to subsidiaries, affiliates, and agents of banks.
       The OCC disagrees: The requirements of section 25b are 
     inapplicable to this rulemaking. Section 25b applies when the 
     Comptroller determines, on a case-by-case basis, that a state 
     consumer financial law is preempted pursuant to the standard 
     for conflict preemption established by the Supreme Court in 
     Barnett, i.e., when the Comptroller makes a preemption 
     determination. This rulemaking does not preempt a state 
     consumer financial law but rather interprets a bank's federal 
     authority to lend. Furthermore, commenters arguing that 
     section 25b(f) (which addresses section 85) does not exempt 
     this rulemaking from the procedures in section 25b and that 
     sections 25b(b)(2), (e), and (h)(2) (which address bank 
     subsidiaries, affiliates, and agents) preclude the agency 
     from issuing this rule are mistaken; this rulemaking is not 
     an interpretation of section 85, nor does it address the 
     applicability of state law to bank subsidiaries, affiliates, 
     or agents.
     C. Administrative Procedure Act
       Several commenters asserted that, for various reasons, the 
     proposal is arbitrary and capricious and, therefore, in 
     violation of the APA. Some commenters argued that the 
     proposal lacks an evidentiary basis, either entirely or with 
     respect to certain assertions, such as the existence of legal 
     uncertainty. The OCC disagrees. The APA's arbitrary and 
     capricious standard requires an agency to make rational and 
     informed decisions based on the information before it. 
     Furthermore, the standard does not require the OCC to develop 
     or cite empirical or other data to support its rule or wait 
     for problems to materialize before acting. Instead, the OCC 
     may rely on its expertise to address the problems that may 
     arise.
       The OCC has decided to issue this rule to resolve the 
     effects of legal uncertainty on banks and their third-party 
     relationships. In this case, the OCC's views are informed by 
     courts' divergent true lender tests and the resulting lack of 
     predictability faced by stakeholders. While the OCC 
     understands its rule may not resolve all legal uncertainty 
     for every loan, this is not a prerequisite for the agency to 
     take this narrowly tailored action. Taking these 
     considerations into account, the OCC has made a rational and 
     informed decision to issue this rule.
       Commenters also argued that the OCC's actions violate the 
     APA because the agency has not given notice of its intention 
     to reverse an existing policy or provided the factual, legal, 
     and policy reasons for doing so. Specifically, these 
     commenters referenced the OCC's longstanding policy 
     prohibiting banks from entering into rent-a-charter schemes. 
     This rulemaking does not reverse the OCC's position. The 
     OCC's longstanding and unwavering opposition to predatory 
     lending, including but not limited to predatory lending as 
     part of a third-party relationship, remains intact and 
     strong. In fact, this rulemaking would solve the rent-a-
     charter issues raised and ensure that banks do not 
     participate in those arrangements. As noted in the proposal, 
     the OCC's statutes and regulations, enforceable guidelines, 
     guidance, and enforcement authority provide robust and 
     effective safeguards against predatory lending when a bank 
     exercises its lending authority. This rule does not alter 
     this framework but rather reinforces its importance by 
     clarifying that it applies to every loan a bank makes and by 
     providing a simple test to identify precisely when a bank has 
     made a loan. If a bank fails to satisfy its compliance 
     obligations, the OCC will not hesitate to use its enforcement 
     authority consistent with its longstanding policy and 
     practice.
       Furthermore, the final rule does not change the OCC's 
     expectation that all banks establish and maintain prudent 
     credit underwriting practices and comply with applicable law, 
     even when they partner with third parties. These expectations 
     were in place before the OCC issued its proposal and will 
     remain in place after the final rule takes effect. For these 
     reasons, the final rule does not represent a change in OCC 
     policy.
     D. Comments on the Proposed Regulatory Text
       As noted previously, the OCC's proposed regulatory text set 
     out a test for determining when a bank has made a loan for 
     purposes of 12 U.S.C. 24, 85, 371, 1463(g), and 1464(c). 
     Under this test, a bank made a loan if, as of the date of 
     origination, it was named as the lender in the loan agreement 
     or funded the loan.
       Some commenters supported the rule without change, stating 
     that the proposal provided the clarity needed to determine 
     which entity is the true lender in a lending relationship. 
     Other commenters supported the proposal as a general matter 
     but suggested specific changes, including clarifying that the 
     funding prong does not include certain lending or financing 
     arrangements such as warehouse lending, indirect auto lending 
     (through bank purchases of retail installment contracts 
     (RICs)), loan syndication, and other structured finance.
       These commenters are correct that the funding prong of the 
     proposal generally does not include these types of 
     arrangements: They do not involve a bank funding a loan at 
     the time of origination. For example, when a bank purchases a 
     RIC from an auto dealer, as is often the case with indirect 
     auto lending, the bank does not ``fund'' the loan. When a 
     bank provides a warehouse loan to a third party that 
     subsequently draws on that warehouse loan to lend to other 
     borrowers, the bank is not funding the loans to these other 
     borrowers. In contrast, and as noted in the proposal, the 
     bank is the true lender in a table funding arrangement when 
     the bank funds the loan at origination.
       Another commenter recommended that the OCC consider the 
     ``safe harbor'' established in the recent settlement between 
     the Colorado Attorney General and several financial 
     institutions and fintech lenders. While we are aware of this 
     settlement, the OCC believes that our approach achieves the 
     goal of legal certainty while providing the necessary 
     safeguards.
       One commenter requested that the OCC expressly state in the 
     final rule that the rulemaking is not intended to displace or 
     alter other regulatory regimes, including those that address 
     consumer protection. Another commenter requested that the OCC 
     clarify how account information in true lender arrangements 
     should be reported to consumer reporting agencies under the 
     Fair Credit Reporting Act. As the preamble to the proposal 
     noted, the OCC's rule does not affect the application of any 
     federal consumer financial laws, including, but not limited 
     to, the meaning of the terms (1) ``creditor'' in the Truth in 
     Lending Act (15 U.S.C. 1601 et seq.) and Regulation Z (12 CFR 
     part 1026) and (2) ``lender'' in Regulation X (12 CFR part 
     1024), which implements the Real Estate Settlement Procedures 
     Act of 1974 (12 U.S.C. 2601 et seq.). Similarly, the OCC's 
     rule does not affect the applicability of the Home Mortgage 
     Disclosure Act (12 U.S.C. 2801 et seq.), the Equal Credit 
     Opportunity Act (15 U.S.C. 1691 et seq.), the Fair Credit 
     Reporting Act (15 U.S.C. 1681 et seq.), or their implementing 
     regulations (Regulation C (12 CFR part 1003), Regulation B 
     (12 CFR part 1002), and Regulation V (12 CFR part 1022)), 
     respectively. The OCC recommends that commenters direct 
     questions regarding these statutes and regulations to the 
     Consumer Financial Protection Bureau.
       Some commenters stated that the two prongs in the 
     proposal's test would produce contradictory and absurd 
     results. For example, several commenters noted that, under 
     the proposal, two banks could be the true lender (e.g., at 
     origination, one bank is named as the lender on the loan 
     agreement and another bank funds the loan). In response to 
     this comment, we have amended the regulatory text to provide 
     that where one bank is named as the lender in the loan 
     agreement and another bank funds the loan, the bank named as 
     the lender in the loan agreement makes the loan. This 
     approach will provide additional clarity and allow 
     stakeholders, including borrowers, to easily identify the 
     bank that makes the loan. Otherwise, the OCC adopts the 
     regulatory text as proposed.
     E. Rent-a-Charter Concerns; Supervisory Expectations
       The OCC received multiple comments expressing concern that 
     the proposal would facilitate rent-a-charter relationships 
     and

[[Page H3105]]

     thereby enable nonbank lenders to engage in predatory or 
     otherwise abusive lending practices. These commenters noted 
     that nonbanks are generally not subject to the type of 
     prudential supervision that applies to banks and that usury 
     caps are the most effective method to curb predatory lending 
     by nonbanks. They argued that the OCC's rule would 
     effectively nullify these caps and facilitate the expansion 
     of predatory lending.
       As explained above, in a rent-a-charter arrangement, a 
     lender receives a fee to rent out its charter and unique 
     legal status to originate loans on behalf of a third party, 
     enabling the third party to evade state and local laws, such 
     as usury caps and other consumer protection laws. At the same 
     time, the lender disclaims any responsibility for these 
     loans. As a result of these arrangements, consumers can find 
     themselves in debt to an unscrupulous nonbank lender that is 
     subject to very little or no prudential supervision on a loan 
     at an interest rate grossly in excess of the state usury cap.
       The OCC agrees that rent-a-charter schemes have no place in 
     the federal financial system but disagrees that this rule 
     facilitates such schemes. As noted above, instead, this 
     proposal would help solve the problem by (1) providing a 
     clear and simple test for determining when a bank makes a 
     loan and (2) emphasizing the robust supervisory framework 
     that applies to any loan made by a bank and to all third-
     party relationships to which banks are a party. As noted 
     above, if a bank fails to satisfy its obligations under this 
     supervisory framework, the OCC will use all the tools at its 
     disposal, including its enforcement authority.
       Although the proposal discussed this supervisory framework 
     in detail, it bears repeating because of its importance to 
     this rulemaking. Every bank is responsible for establishing 
     and maintaining prudent credit underwriting practices that: 
     (1) Are commensurate with the types of loans the bank will 
     make and consider the terms and conditions under which they 
     will be made; (2) consider the nature of the markets in which 
     the loans will be made; (3) provide for consideration, prior 
     to credit commitment, of the borrower's overall financial 
     condition and resources, the financial responsibility of any 
     guarantor, the nature and value of any underlying collateral, 
     and the borrower's character and willingness to repay as 
     agreed; (4) establish a system of independent, ongoing credit 
     review and appropriate communication to management and to the 
     board of directors; (5) take adequate account of 
     concentration of credit risk; and (6) are appropriate to the 
     size of the institution and the nature and scope of its 
     activities. Moreover, every bank is expected to have loan 
     documentation practices that: (1) Enable the institution to 
     make an informed lending decision and assess risk, as 
     necessary, on an ongoing basis; (2) identify the purpose of a 
     loan and the source of repayment and assess the ability of 
     the borrower to repay the indebtedness in a timely manner; 
     (3) ensure that any claim against a borrower is legally 
     enforceable; (4) demonstrate appropriate administration and 
     monitoring of a loan; and (5) take account of the size and 
     complexity of a loan. Every bank should also have appropriate 
     internal controls and information systems to assess and 
     manage the risks associated with its lending activities, 
     including those that provide for monitoring adherence to 
     established policies and compliance with applicable laws and 
     regulations, as well as internal audit systems.
       In addition, a bank's lending must comply with all 
     applicable laws and regulations, including federal consumer 
     protection laws. For example, section 5 of the Federal Trade 
     Commission Act (FTC Act) provides that ``unfair or deceptive 
     acts or practices in or affecting commerce'' are unlawful. 
     The Dodd-Frank Wall Street Reform and Consumer Protection Act 
     also prohibits unfair, deceptive, or ``abusive'' acts or 
     practices. The OCC has taken a number of public enforcement 
     actions against banks for violating section 5 of the FTC Act 
     and will continue to exercise its enforcement authority to 
     address unlawful actions.
       Banks also are subject to federal fair lending laws and may 
     not engage in unlawful discrimination, such as ``steering'' a 
     borrower to a higher cost loan on the basis of the borrower's 
     race, national origin, age, or gender. If a bank engages in 
     any unlawful discriminatory practices, the OCC will take 
     appropriate action under the federal fair lending laws. 
     Further, under the CRA regulations, CRA-related lending 
     practices that violate federal fair lending laws, the FTC 
     Act, or Home Ownership and Equity Protection Act, or that 
     evidence other discriminatory or illegal credit practices, 
     can adversely affect a bank's CRA performance rating.
       The OCC has also taken significant steps to eliminate 
     predatory, unfair, or deceptive practices in the federal 
     banking system, recognizing that ``[s]uch practices are 
     inconsistent with important national objectives, including 
     the goals of fair access to credit, community development, 
     and stable homeownership by the broadest spectrum of 
     America.'' To address these concerns, the OCC requires banks 
     engaged in lending to take into account the borrower's 
     ability to repay the loan according to its terms. In the 
     OCC's experience, ``a departure from fundamental principles 
     of loan underwriting generally forms the basis of abusive 
     lending: Lending without a determination that a borrower can 
     reasonably be expected to repay the loan from resources other 
     than the collateral securing the loan, and relying instead on 
     the foreclosure value of the borrower's collateral to recover 
     principal, interest, and fees.''
       Additionally, the OCC has cautioned banks about lending 
     activities that may be considered predatory, unfair, or 
     deceptive, noting that many such lending practices are 
     unlawful under existing federal laws and regulations or 
     otherwise present significant safety, soundness, or other 
     risks. These practices include those that target prospective 
     borrowers who cannot afford credit on the terms being 
     offered, provide inadequate disclosures of the true costs and 
     risks of transactions, involve loans with high fees and 
     frequent renewals, or constitute loan ``flipping'' (frequent 
     re-financings that result in little or no economic benefit to 
     the borrower that are undertaken with the primary or sole 
     objective of generating additional fees). Policies and 
     procedures should also be designed to ensure clear and 
     transparent disclosure of the terms of the loan, including 
     relative costs, risks, and benefits of the loan transaction, 
     which helps to mitigate the risk that a transaction could be 
     unfair or deceptive. The NPR also highlighted specific 
     questions that the OCC evaluates as part of its robust 
     supervision of banks' lending relationships.
       In addition to this framework targeted at banks' lending 
     activities, the OCC has issued comprehensive guidance on 
     third-party risk management. These standards apply to any 
     relationship between a bank and a third party, including 
     lending relationships, regardless of which entity is the true 
     lender. Pursuant to this guidance, the OCC expects banks to 
     institute appropriate safeguards to manage the risks 
     associated with their third-party relationships.
       Under the final rule, this robust supervisory framework 
     will continue to apply to banks that are the true lender in a 
     lending relationship with a third party. Rather than allowing 
     banks to enter into rent-a-charter schemes, the final rule 
     will ensure that banks understand that the OCC will continue 
     to hold banks accountable for their lending activities.
     IV. Regulatory Analyses
       Paperwork Reduction Act. In accordance with the 
     requirements of the Paperwork Reduction Act of 1995 (PRA), 44 
     U.S.C. 3501 et seq., the OCC may not conduct or sponsor, and 
     respondents are not required to respond to, an information 
     collection unless it displays a currently valid Office of 
     Management and Budget (OMB) control number. The OCC has 
     reviewed the final rule and determined that it will not 
     introduce any new or revise any existing collection of 
     information pursuant to the PRA. Therefore, no submission 
     will be made to OMB for review.
       Regulatory Flexibility Act. The Regulatory Flexibility Act 
     (RFA), 5 U.S.C. 601 et seq., requires an agency, in 
     connection with a final rule, to prepare a Final Regulatory 
     Flexibility Analysis describing the impact of the rule on 
     small entities (defined by the Small Business Administration 
     (SBA) for purposes of the RFA to include commercial banks and 
     savings institutions with total assets of $600 million or 
     less and trust companies with total assets of $41.5 million 
     or less) or to certify that the final rule would not have a 
     significant economic impact on a substantial number of small 
     entities.
       The OCC currently supervises approximately 745 small 
     entities. The OCC expects that all of these small entities 
     would be impacted by the rule. While this final rule could 
     affect how banks structure their current or future third-
     party relationships as well as the amount of loans originated 
     by banks, the OCC believes the costs associated with any 
     administrative changes in bank lending policies and 
     procedures would be de minimis. Banks already have systems, 
     policies, and procedures in place for issuing loans when 
     third parties are involved. It takes significantly less time 
     to amend existing policies than to create them, and the OCC 
     does not expect any needed adjustments will involve an 
     extraordinary demand on a bank's human resources. In 
     addition, any costs would likely be absorbed as ongoing 
     administrative expenses. Therefore, the OCC certifies that 
     this rule will not have a significant economic impact on a 
     substantial number of small entities. Accordingly, a Final 
     Regulatory Flexibility Analysis is not required.
       Unfunded Mandates Reform Act. Consistent with the Unfunded 
     Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1532, the OCC 
     considers whether a final rule includes a federal mandate 
     that may result in the expenditure by state, local, and 
     tribal governments, in the aggregate, or by the private 
     sector, of $100 million adjusted for inflation (currently 
     $157 million) in any one year. The final rule does not impose 
     new mandates. Therefore, the OCC concludes that 
     implementation of the final rule would not result in an 
     expenditure of $157 million or more annually by state, local, 
     and tribal governments, or by the private sector.
       Riegle Community Development and Regulatory Improvement 
     Act. Pursuant to section 302(a) of the Riegle Community 
     Development and Regulatory Improvement Act of 1994 (RCDRIA), 
     12 U.S.C. 4802(a), in determining the effective date and 
     administrative compliance requirements for new regulations 
     that impose additional reporting, disclosure, or other 
     requirements on insured depository institutions, the OCC must 
     consider, consistent with principles of safety and soundness 
     and the public interest, any administrative burdens that such 
     regulations would place on depository institutions, including

[[Page H3106]]

     small depository institutions, and customers of depository 
     institutions, as well as the benefits of such regulations. In 
     addition, section 302(b) of RCDRIA, 12 U.S.C. 4802(b), 
     requires new regulations and amendments to regulations that 
     impose additional reporting, disclosures, or other new 
     requirements on insured depository institutions generally to 
     take effect on the first day of a calendar quarter that 
     begins on or after the date on which the regulations are 
     published in final form. This final rule imposes no 
     additional reporting, disclosure, or other requirements on 
     insured depository institutions, and therefore, section 302 
     is not applicable to this rule.
       Congressional Review Act. For purposes of the Congressional 
     Review Act (CRA), 5 U.S.C. 801 et seq., the Office of 
     Information and Regulatory Affairs (OIRA) of the OMB 
     determines whether a final rule is a ``major rule,'' as that 
     term is defined at 5 U.S.C. 804(2). OIRA has determined that 
     this final rule is not a major rule. As required by the CRA, 
     the OCC will submit the final rule and other appropriate 
     reports to Congress and the Government Accountability Office 
     for review.
       Administrative Procedure Act. The APA, 5 U.S.C. 551 et 
     seq., generally requires that a final rule be published in 
     the Federal Register not less than 30 days before its 
     effective date. This final rule will be effective 60 days 
     after publication in the Federal Register, which meets the 
     APA's effective date requirement.
     List of Subjects in 12 CFR Part 7
       Computer technology, Credit, Derivatives, Federal savings 
     associations, Insurance, Investments, Metals, National banks, 
     Reporting and recordkeeping requirements, Securities, 
     Security bonds.
     Office of the Comptroller of the Currency
       For the reasons set out in the preamble, the OCC amends 12 
     CFR part 7 as follows.
     PART 7--ACTIVITIES AND OPERATIONS
       1. The authority citation for part 7 continues to read as 
     follows:
       Authority: 12 U.S.C. 1 et seq., 25b, 29, 71, 71a, 92, 92a, 
     93, 93a, 95(b)(1), 371, 371d, 481, 484, 1463, 1464, 1465, 
     1818, 1828(m) and 5412(b)(2)(B).
       2. Add Sec. 7.1031 to read as follows:
     Sec. 7.1031  National banks and Federal savings associations 
         as lenders.
       (a) For purposes of this section, bank means a national 
     bank or a Federal savings association.
       (b) For purposes of sections 5136 and 5197 of the Revised 
     Statutes (12 U.S.C. 24 and 12 U.S.C. 85), section 24 of the 
     Federal Reserve Act (12 U.S.C. 371), and sections 4(g) and 
     5(c) of the Home Owners' Loan Act (12 U.S.C. 1463(g) and 12 
     U.S.C. 1464(c)), a bank makes a loan when the bank, as of the 
     date of origination:
       (1) Is named as the lender in the loan agreement; or
       (2) Funds the loan.
       (c) If, as of the date of origination, one bank is named as 
     the lender in the loan agreement for a loan and another bank 
     funds that loan, the bank that is named as the lender in the 
     loan agreement makes the loan.
     Brian P. Brooks,
     Acting Comptroller of the Currency.
     [FR Doc. 2020-24134 Filed 10-29-20; 8:45 am]
     BILLING CODE 4810-33-P
  Mr. McHENRY. Madam Speaker, additionally, I would highlight for you 
that the outline here and the arguments by my colleagues on the other 
side of the aisle really strikes at the nature of national banking.
  So just repeal the National Banking Act rather than trying to 
undermine it by taking away the legal principle by which a bank can 
make a loan. That is what this rule does, and that is the absurdity of 
this debate. That is why I oppose this attempt on the floor today.
  Madam Speaker, I yield 2 minutes to the gentleman from Georgia (Mr. 
Loudermilk), my colleague and friend.
  Mr. LOUDERMILK. Madam Speaker, I thank my friend and colleague from 
North Carolina for managing the opposition to this.
  Look, it is simple. The reason we are here today is to debate the 
Democrats' latest episode in their anti-financial technology agenda, 
but also their rush to undo any policy of the previous administration, 
whether it was good or bad.
  Now, here are the facts: More than 30 percent of adults are unbanked 
or underbanked, 40 percent do not have enough savings to cover a $400 
emergency expense, 42 percent have a subprime credit score and are 
rejected for bank loans at a rate four times higher than those with 
prime credit.
  Now, fintech has been instrumental in expanding access to credit for 
consumers who have little or no credit history. Online lending has 
grown to $90 billion a year.
  So what do consumers typically use these loans to pay for?
  Funerals, weddings, car repairs, and home improvement.
  Fintech is particularly important for minorities. In fact, fintechs 
were the top PPP lenders to Black-owned businesses and Hispanic-owned 
businesses during the pandemic.
  But there is an issue that has caused difficulty when banks and 
fintech companies partner to make loans, and that is the question of 
which entity is considered the true lender. Until recently, this 
question was attempted to be settled in a series of confusing and 
conflicting lawsuits. The courts are divided on it. But, last year, the 
OCC finalized a rule to provide much-needed certainty. It is no 
surprise that the organizations calling for the rule to be overturned 
are the so-called consumer groups that, for the most part, are funded 
by trial lawyers.
  The Democrats are attempting to overturn this rule because some 
imaginary lenders could rent a bank charter to engage in predatory 
lending, but as the ranking member has just stated, that is clearly 
prohibited in the existing rule. This resolution is devastating to 
minority consumers and businesses, those with subprime credit, and the 
unbanked.
  Instead of giving those people options, this resolution would direct 
them to payday lenders, or in States like Georgia where payday lending 
is illegal, they will have no access to credit.
  Madam Speaker, I urge opposition to this disastrous resolution.
  Ms. WATERS. Madam Speaker, I yield 2 minutes to the distinguished 
gentlewoman from Michigan (Ms. Tlaib).
  Ms. TLAIB. Madam Speaker, we know it is expensive to be poor in our 
country; that we live in a country with a system that continues to put 
profit before our people, and it must stop.
  In my home State of Michigan, communities that are more than a 
quarter Black and Latino have 50 percent more payday lenders than 
anywhere else in the State. These lenders target our communities, the 
most financially vulnerable communities. Payday lenders in Michigan are 
62 percent more common in low-income Census tracts compared to 
statewide average.
  That is what folks mean when they say that we need to abolish 
structural racism in our country.
  You cannot justify loans of 100 percent APR or higher as providing 
access to credit when they trap borrowers in destructive cycles of debt 
and ruin their credit. World Business Lenders offered loans of upwards 
of 268 percent of APR, despite the fact that its rent-a-bank partner 
was regulated by the OCC. They found a way around the rules, and that 
is unacceptable.
  OCC's rules leave States like our State of Michigan no ability to 
enforce their own State rate caps, giving predatory lenders free rein 
to exploit our neighbors with outrageous APRs.
  Repealing the true lender rule is the first step toward protecting 
borrowers from predatory lenders, and I am proud to support it.
  Mr. McHENRY. Madam Speaker, I yield 1\1/2\ minutes to the gentleman 
from Utah (Mr. Moore), a great new Member of the Congress.
  Mr. MOORE of Utah. Madam Speaker, I rise today to speak in opposition 
to the CRA before us.
  Innovation in our financial industry lifts Americans across all 
levels of the socioeconomic spectrum. A great example of this has been 
the emergence of the fintech industry, which has helped more Americans 
access secure, affordable credit.
  Unfortunately, government regulation has stymied innovation as 
regulatory uncertainties have imposed artificial barriers to our 
creativity. Recent court rulings have only exacerbated this uncertainty 
by creating confusion about who the true lender of a loan is when a 
bank works with a third party.
  In 2020, the Office of the Comptroller sought to clarify this 
uncertainty by finalizing the true lender rule. This rule allowed our 
local community and regional banks to provide expanded access to 
banking services and lower the cost of banking to consumers across the 
Nation. It is that simple.
  Commonsense reforms that help banks and the fintech industry do 
business, in turn, make life easier for families, individuals, and 
businesses. Unfortunately, my Democrat colleagues are seeking to roll 
this rule back.
  Nullifying the rule will decrease credit accessibility for 
underserved communities, hurt community banks' ability to utilize new 
technologies, and dissuade innovation in the financial services sector.

[[Page H3107]]

  Madam Speaker, I oppose S.J. Res. 15, and I encourage my colleagues 
to vote ``no.''
  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.
  Mr. GREEN of Texas. And still I rise, Madam Speaker. Again, I thank 
the chairwoman for the time and the opportunity.
  I would say to all, I recall the debate around the yield spread 
premium, wherein a loan originator could say to a person, ``Here is a 
loan, you are lucky to get it for 10 percent'' when the person 
qualified for a loan at 5 percent.
  We eliminated the dastardly yield spread premium and the harm that it 
caused. We have a similar circumstance with the rent-a-bank scheme that 
steals the American Dream, such that people who qualify for better 
loans will likely get higher loans because they don't always understand 
the scheme.
  So I rise today, and I thank Mr. Garcia for what he has done to bring 
this bill to fruition. I thank the Chairwoman, and I absolutely support 
the legislation.
  Mr. McHENRY. Madam Speaker, I yield 3 minutes to the gentleman from 
Kentucky (Mr. Barr), who is the ranking member on the Subcommittee on 
National Security, International Development, and Monetary Policy of 
the Financial Services Committee. He is also a member of the Foreign 
Affairs Committee.

                              {time}  1400

  Mr. BARR. Madam Speaker, I rise today also in opposition to S.J. 
Resolution 15, the Congressional Review Act repeal of the Office of the 
Comptroller of the Currency's true lender rule.
  The United States has the most vibrant and innovative financial 
system in the world. Recent advancements in technology have fostered 
products and partnerships that expand access to credit to large swaths 
of the population that previously couldn't access basic financial 
services.
  Many of these innovations faced challenges from regulatory red tape 
or confusing and often conflicting rules. The OCC's true lender rule 
gave needed clarity to banks and their partners, fixing the disastrous 
Madden rule.
  The OCC's true lender rule gave that clarity, but unfortunately, the 
effort in the House today threatens to undermine the progress that we 
have made and compromise underbanked individuals' and small businesses' 
access to financial services.
  I spoke with a local Kentucky bank that partners with a nonbank 
fintech lender to provide credit to consumers, including many 
underbanked populations. They told me that absent the true lender rule, 
they will once again be buried in compliance costs to keep track of the 
patchwork of cases that dictate the rules of the road.
  Rather than embrace innovation to deliver cost savings to their 
customers, many of whom have trouble accessing traditional financial 
services to begin with, the bank will need to retain thousand-dollar-
an-hour New York lawyers just to keep everything straight. And guess 
what? Those costs get passed on to the consumer through higher prices 
or reduced product availability.
  This is yet another example of the Democrats sacrificing good policy 
for the sake of political points, all under the guise of consumer 
protection.
  Contrary to some of the rhetoric from my colleagues on the other side 
of the aisle, a vote for this CRA will actually harm the very people 
they purport to be helping.
  Madam Speaker, one final point. I include in the Record an April 14, 
2021, letter to the chair of the Financial Services Committee from the 
former OCC Acting Comptroller Blake Paulson.
                                         Office of the Comptroller


                                              of the Currency,

                                   Washington, DC, April 14, 2021.
     Hon. Maxine Waters,
     Chairwoman, Committee on Financial Services, House of 
         Representatives, Washington, DC.
     Hon. Patrick McHenry,
     Ranking Member, Committee on Financial Services, House of 
         Representatives, Washington, DC.
       Dear Chairwoman Waters and Ranking Member McHenry: On March 
     26, 2021, H.J. Res. 35 was introduced, providing for 
     Congressional disapproval under the Congressional Review Act 
     of the Office of the Comptroller of the Currency's (OCC) 
     final rule, entitled ``National Banks and Federal Savings 
     Associations as Lenders,'' commonly referred to as the ``True 
     Lender'' rule. As you and other members consider the 
     resolution, I want you to be aware of the rule's intended 
     effect and the adverse impact of overturning the rule.
       On October 27, 2020, the OCC issued its final true lender 
     rule to provide legal and regulatory certainty to national 
     banks' and federal savings associations' (banks) lending, 
     including loans made in partnerships with third parties. The 
     OCC's rule specifies that a bank makes a loan and is 
     considered to be the true lender of the loan if, as of the 
     date of origination, it (1) is named as the lender in the 
     loan agreement or (2) funds the loan. The rule clarifies that 
     as the true lender of a loan, the bank retains the compliance 
     obligations associated with making the loan, even if the loan 
     is later sold, thus negating concerns regarding harmful rent-
     a-charter arrangements. Our rulemaking prevents potential 
     arrangements in which a bank receives a fee to ``rent'' its 
     charter and unique legal status to a third party with the 
     intent of evading state and local laws, while disclaiming any 
     compliance responsibility for the loan. These schemes have 
     absolutely no place in the federal banking system, and this 
     rule helps address them.
       The rule makes clear banks' responsibility and 
     accountability for the loans they make and facilitates the 
     OCC's supervision of this core banking activity. Disapproval 
     of the rule would return bank lending relationships to the 
     previous state of legal and regulatory uncertainty, which, as 
     nearly 50 preeminent economic and finance scholars explained 
     in January 2021, adversely affects the function of secondary 
     markets and restricts the availability of credit.
       Legal and regulatory certainty facilitates access to 
     responsible credit and clarifies responsibility and 
     accountability in lending involving third-party partnerships. 
     Bank third-party partnerships help banks better serve their 
     communities by expanding access to affordable credit products 
     from mainstream financial service providers. Such access is 
     particularly important as individuals and small businesses 
     across the country work to recover from effects of the COVID-
     19 pandemic. Banks seek partnerships with third parties for a 
     variety of legitimate reasons, including reaching additional 
     markets, benefiting from specific expertise or technology, 
     and improving the efficiency and cost of their own 
     operations. The OCC's third-party risk management guidance 
     and supplemental exam procedures make clear to banks that 
     they retain the risks for activities conducted through 
     relationships with third parties.
       With the legal and regulatory certainty provided by the 
     rule, lending by banks made in partnership with third parties 
     can be assessed as part of the ongoing supervision of these 
     banks, including as part of the OCC's examinations to 
     evaluate bank compliance with applicable laws and regulations 
     that ensure consumer protection, Bank Secrecy Act and anti-
     money laundering compliance, required disclosures, and other 
     obligations associated with making loans. The OCC clarified 
     examiner responsibilities in assessing true lender activities 
     in third-party relationships in 202l. This clarification 
     addressed considerations related to assessing banks' due 
     diligence on the lending product or activity (e.g., terms and 
     scope) and the third party; credit risk management, including 
     underwriting practices; model risk management; compliance 
     management systems; and ongoing monitoring of the lending 
     activity and the third party's performance.
       If a bank fails to satisfy any of its compliance 
     obligations, the OCC will not hesitate to use its supervisory 
     and enforcement authorities to correct the deficiencies, 
     protect consumers, and ensure the federal banking system 
     operates in a safe, sound, and fair manner.
       As you consider the Congressional Review Act resolution, 
     you should be confident that the OCC issued this rule with 
     the intent to enhance its ability to supervise bank lending. 
     The rulemaking conformed to the Administrative Procedure Act, 
     and the agency considered all stakeholder comments provided 
     during the rulemaking process. The resulting rule is 
     consistent with the authority granted to the agency by 
     Congress.
       It is also important to dispel misperceptions of the rule, 
     many of which are repeated by opponents of the rule. To be 
     clear, the rule does not change banks' authority to export 
     interest rates. That authority is granted by federal statute. 
     Nor does the rule permit national banks to charge whatever 
     rate they like; national banks and federal savings 
     associations have the same authority as state banks regarding 
     the exportation of interest rates. Both federal and state-
     chartered banks must conform to applicable interest rate 
     limits. Disparities of interest rates from state to state 
     result from differences in the state laws that impose these 
     caps, not OCC rules or actions. States retain the authority 
     to set interest rates, and rates vary from state-to-state.
       The rule does not limit states' ability to regulate the 
     conduct of state-licensed and regulated nonbank lenders, 
     which engage in the vast majority of predatory lending. 
     States are the primary regulators of nonbank lenders, 
     including payday lenders. Nonbank lenders are generally also 
     subject to the rules and enforcement actions of the Consumer 
     Financial Protection Bureau (CFPB).

[[Page H3108]]

       It is also important to understand why demand exists for 
     short-term, small-dollar credit products and why many 
     consumers rely on nonbank sources of such credit, including 
     payday lenders. Unfortunately, mainstream service providers, 
     including commercial banks, largely abandoned short-term 
     small-dolJar lending over the past two decades. The resulting 
     lack of choice and fewer options pushed up the cost of these 
     products and forced consumers to seek services on less 
     favorable terms. Because millions of U.S. consumers do not 
     have sufficient savings or access to traditional credit, they 
     borrow nearly $90 billion each year in short-term small-
     dollar loans typically ranging from $300 to $5,000 to make 
     ends meet and to address things like emergency car repairs 
     and other unexpected expenses. That is why the OCC has 
     remained vocal about encouraging banks to provide consumers 
     with more safe and affordable options to meet these small-
     dollar needs. In providing these products, banks should 
     consider the ``Interagency Lending Principles for Offering 
     Responsible Small-Dollar Loans,'' published in May 2020. 
     Banks should also consider the full and actual cost of a 
     credit product and its affordability. Fees associated with 
     short-term loans may range from $10 to $30 per $100 borrowed, 
     and the imputed annual percentage rate (APR) of those loans 
     can appear to exceed 100 percent or more. But often, the fees 
     and total cost of these loans to the consumer can be less 
     than that of loans made with a 36 percent APR, when such 
     loans are available at all.
       As you consider the Congressional Review Act resolution, 
     please keep in mind what may be an unintended consequence of 
     a Congressional Review Act disapproval. Disapproving the 
     OCC's true lender rule will constrain future Comptroller 
     ability to address the true lender issue and may limit the 
     OCC's ability to take supervisory or enforcement actions 
     against banks that would have been deemed to have ``made'' 
     the loan under the true lender rule. Rather than vacate the 
     rule, limit future Comptrollers from taking up similar rules 
     or possibly hamstring the OCC's enforcement authority, 
     changes to the rule, if any, should be made through the 
     agency's rulemaking process and in accordance with the 
     Administrative Procedures Act.
       Enclosed is a fact sheet that provides additional 
     information for your awareness. If you have any questions or 
     need additional information, please do not hesitate to 
     contact me or Carrie Moore, Director, Congressional 
     Relations.
           Sincerely,
                                                 Blake J. Paulson,
                               Acting Comptroller of the Currency.

  Mr. BARR. The point I want to highlight is that the former Acting 
Comptroller was making the point that disapproving the OCC's true 
lender rule will constrain a future Comptroller's ability to address 
the true lender issue and limit the OCC's ability to take supervisory 
or enforcement actions against banks that would have been deemed to 
have made the loan under the true lender rule; meaning that the way the 
CRA law operates, if the House passes this resolution, we will have a 
permanent problem in the credit markets that will deprive low- and 
moderate-income Americans of the financial products that they 
desperately need.
  That is why I urge all my colleagues to reject this misguided 
proposal.
  Ms. WATERS. Madam Speaker, I yield 1 minute to the gentlewoman from 
California (Ms. Porter).
  Ms. PORTER. Madam Speaker, I express my gratitude to Chairwoman 
Waters for allowing me to speak in support of invalidating the 
predatory true lender rule.
  In our home State, the legislature passed an interest rate cap of 36 
percent on loans of up to $10,000 about 2 years ago.
  Before California Governor Newsom had even signed this bill into law, 
predatory online lenders began plotting during their shareholder 
earnings calls to evade the new law through rent-a-bank arrangements. 
Companies like Speedy Cash and CashNetUSA went so far as to gloat about 
the California law creating a huge opportunity for them by driving out 
their competition, subprime title lenders based in California.
  Since the founding of the United States, States have chosen to impose 
their own limits on interest rates that lenders may charge consumers. 
The Trump administration's true lender rule greenlit these rent-a-bank 
schemes and, in doing so, undermined the will of Californians who, 
through the democratic process, chose to prohibit abusive interest 
rates.
  The true lender rule violates our federalist democracy, and it must 
be invalidated.
  Mr. McHENRY. Madam Speaker, I yield 2 minutes to the gentleman from 
Florida (Mr. Donalds), who has been a great new Member of Congress.
  Mr. DONALDS. Madam Speaker, I thank the gentleman for yielding to 
allow me to speak on this matter.
  It is important to understand, Madam Speaker, that having access to 
financial products is critical for not only the innovation of our 
markets but for the future expansion of our markets. It is time to take 
the pettiness out of politics and actually prioritize policy that puts 
Americans first and puts America first.
  True lender is not being discussed in a way that considers people. If 
that were the case, we would be recognizing the incredible ways it has 
spurred innovation in our markets and has provided more access to 
credit and other financial products for Americans.
  Instead of Congress working together to create financial equity in a 
sustainable way or ensuring that the United States remains a global 
leader, Democrats are working to undo anything accomplished under the 
Trump administration, even if it means sacrificing the good of the 
people.
  I support assessing harmful financial policies of the past and 
working to undo some of the mistakes that have been made. In fact, we 
could benefit from assessing legislation like Dodd-Frank, which has put 
tremendous downward pressure on community banks being formed in the 
United States. But that is not what is being done here.
  We are not having honest conversations. My peers across the aisle are 
undoing good policy without an objective view to determine how it helps 
or hurts Americans.
  Fintech has played a significant role in transforming our markets, 
helping smaller banks become more competitive, and creating more 
products and access for Americans. The true lender rule has supported 
that because it clarifies the legal framework that allows these bank 
and nonbank partnerships to be successful for consumers.
  We should be prioritizing fair access to financial services for 
Americans and work to protect and promote innovation in our markets so 
that consumers have as many pathways as possible to prosperity and 
achieving the American Dream.
  If we scrap the true lender rule, we will disrupt our market, stifle 
innovation, and hinder access to accountable and affordable credit for 
consumers and small businesses. This is not the precedent we should set 
in this body. It is a gross abuse of power and a knife in the back of 
consumers.
  Ms. WATERS. Madam Speaker, I reserve the balance of my time.
  Mr. McHENRY. Madam Speaker, I yield myself the balance of my time.
  The true lender rule specifies that when a bank makes a loan, the 
bank is the true lender. The rule clarifies what was uncertain and, 
therefore, made those loans more expensive.
  This gives certainty to the marketplace. It is a good thing. The true 
lender rule is a good thing.
  Under the true lender rule, we have fintechs that have been enabled 
to make loans in coordination with banks and regulated like the people 
that they work with, like the banks that they work with, which means 
the loans fall under Federal consumer protection laws, under Federal 
usury laws, under Federal laws.
  One case in point, what the true lender rule enabled was one out of 
four African American-owned businesses accessing credit through 
fintechs.
  I would ask Members to review a few pieces of evidence that I have 
here.
  Madam Speaker, I would refer the Members to a study conducted by NYU 
highlighting the important role that fintechs play in supporting 
African American-owned small businesses.
  I would also refer the Members to letters in opposition to S.J. Res. 
15: a June 8 letter from the American Bankers Association, Consumer 
Bankers Association, Electronic Transactions Association, Independent 
Bankers of America, Midsize Bank Coalition of America, and National 
Bankers Association; an April 2, 2021, letter from FreedomWorks, 
Americans for Tax Reform, National Taxpayers Union, Center for a Free 
Economy, American Commitment, and Citizens Against Government Waste; a 
letter from the Structured Finance Association; a letter from the 
Independent Community Bankers of America; a May 11, 2021, letter from 
the American Bankers Association; a May 7, 2021, letter from the

[[Page H3109]]

Americans for Prosperity; and a June 22, 2021, letter from the 
Competitive Enterprise Institute, which consists of a number of 
additional signatories.

  None of those people are payday lenders, by the way, which is the 
most spurious argument about the true lender rule. If you want to get 
at payday lending, go talk about valid when made. That would be the 
sound argument from there. At least it has some relationship 
tangentially to payday lending. True lender does not. These are 
different loans that are being described by my colleagues across the 
aisle.
  Let's be clear. The National Banking Act enacted in 1864 established 
the principle by which and explicitly granted national banks the 
ability to transfer loans State-by-State. If you don't like that model, 
then repeal the 1864 National Banking Act instead of making these false 
arguments about the true lender rule, which simply provides clarity 
about the National Banking Act.
  My colleagues across the aisle would have you believe that this is a 
complex scheme cooked up by the previous administration to get around 
consumer protection laws. That is not true. We are talking about 157 
years of banking law here in the United States, and my colleagues 
across the aisle are arguing about that.
  My Democratic colleagues also ignored this basic fact: They have made 
misleading statements about national banks versus State banks. They 
have implied falsehoods on State interest rates. They have cited 
protecting consumers when now they are just leaving them out to dry. 
That is not consumer protection.
  I get it, Democrats are now so politically motived that the facts and 
longstanding precedent no longer matter. I think facts matter. In fact, 
Democrats are so blinded by partisanship, some can't even seem to 
differentiate between that doctrine of valid when made versus what we 
are discussing today, which is true lender. I think we should be rooted 
in fact, and our policy debates should be rooted in fact.
  Make no mistake, the true lender rule provides necessary consumer 
protections and supports affordable credit to more communities. The 
rule does nothing to change interest rates, plain and simple. States 
retain that authority.
  The actions in 2020 to clarify true lender are very different than 
codifying and clarifying valid when made. Both were important 
clarifications, though.
  The argument today is about true lender, not some massive shift away 
from congressional intent, not something new, something longstanding.
  Regardless, the Democrats will push through whatever they can in the 
House today. But as former Acting Comptroller Brooks recently stated, 
nullifying the true lender rule does nothing to undo payday lending--
nothing. And it seems to be what my colleagues across the aisle have a 
real problem with.
  Deal with that. Don't create needless pain for consumers. Don't drive 
up the cost of credit and make it less available by repealing this true 
lender rule.
  This is another moment where my colleagues are working against the 
national banks for politics rather than protecting consumers and 
creating a more vibrant, competitive, and innovative marketplace.
  We should do what is good for consumers in the financial system. 
Technology and innovation facilitate financial inclusion, which should 
be our goal.
  Let's not waste further time here. Let's vote this idea down that we 
are debating right now. Let's get back to actually driving a more 
competitive marketplace and doing what is right for our constituents, 
what is right for consumers, and what is right for families.
  Madam Speaker, I urge a ``no'' vote on this resolution, and I yield 
back the balance of my time.
  Ms. WATERS. Madam Speaker, may I inquire how much time I have 
remaining.
  The SPEAKER pro tempore (Ms. McCollum). The gentlewoman has 18 
minutes remaining.

                              {time}  1415

  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.

[[Page H3110]]

  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.
  The SPEAKER pro tempore. All time for debate has expired.
  Pursuant to the rule, the previous question is ordered on the joint 
resolution.
  The question is on the third reading of the joint resolution.
  The joint resolution was ordered to be read a third time, and was 
read the third time.
  The SPEAKER pro tempore. The question is on passage of the joint 
resolution.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.
  Mr. McHENRY. Madam Speaker, on that I demand the yeas and nays.
  The SPEAKER pro tempore. Pursuant to section 3(s) of House Resolution 
8, the yeas and nays are ordered.
  Pursuant to clause 8 of rule XX, further proceedings on this question 
are postponed.

                          ____________________