• The Senate voted 52 to 47 to repeal the so-called “true lender rule” that consumer advocates and plaintiff lawyers threatened consumers. 

• It was a last-minute banking rule under the Trump administration that covers up who’s really behind triple-digit interest rate loans.

• By partnering with what are called rent-a-banks in the industry, the non-bank lenders can enable triple-digit interest rates on loans. 

Erik Sherman from DC Report @Rawstory writes:

“Finally, there’s something 52 senators can agree on: If a legal money lender is charging you Tony Soprano-level interest rates, you’re at least entitled to know who they are.

The Senate voted 52 to 47 to repeal the so-called “true lender rule” that consumer advocates and plaintiff lawyers threatened consumers. It was a last-minute banking rule under the Trump administration that covers up who’s really behind triple-digit interest rate loans.

If the House follows suit, which it’s expected to do, many consumers will get a break they badly need.

The controversy is about non-banks using complex arrangements with banks to offer loans at stratospheric interest rates, and whether consumers were losing legal protections.

Non-bank lenders, like those in fintech (tech companies working in the financial services space), face limits by states on how much interest they can charge.

For banks, it’s different. “Every state but New Jersey repealed their interest rate limits on banks,” says Lauren Saunders, associate director of the National Consumer Law Center (NCLC). Any officially chartered bank can charge whatever it wants.

By partnering with what are called rent-a-banks in the industry, the non-bank lenders can enable triple-digit interest rates on loans. The actual lenders funnel the money, and the profits, through a rent-a-bank, which puts its name on the document. But critics note that it’s still the non-bank company that is really making the loan, which a court might find illegal if challenged by the borrower…”

See full story here.

Categories: Business, International

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