WASHINGTON — Democratic senators made clear their hopes of blocking a rule that makes it easier for national banks to sell loans to third parties, but invalidating the measure in the tightly divided Senate could be an uphill battle.
At issue is the ability of banks to partner with nonbanks in loan transactions and still enjoy interest-rate flexibility. Under the Office of the Comptroller's rule finalized in October, a national bank is considered to the "true lender" if it is named as such in a loan agreement or it funds the loan.
Banks say the rule is necessary to provide legal clarity when they engage in loan sales across state lines. The "true lender" rule followed a previous measure from the OCC saying that when a national bank makes a loan in compliance with applicable laws at the time, it will be compliant when sold anywhere else.
But consumer advocates and many Democratic lawmakers say the rules enable nonbanks to engage in "rent-a-bank" schemes to evade state usury laws and overcharge customers.
"As we've heard, this new, so-called 'true lender' rule really just opens up the floodgates to rent-a-banks and predatory lending," said Sen. Chris Van Hollen, D-Md., at a Senate Banking Committee hearing on Wednesday.
Van Hollen introduced a resolution last month — accompanied by one in the House — that would nullify the true lender rule under the Congressional Review Act. The law allows Congress to overturn regulations by simple majority, with the president's backing, if lawmakers act within 60 legislative days of the rule being published.
"I do hope that Congress will muster the votes to overturn it," Van Hollen said.
But whether Democrats have the votes is unclear. Republicans largely oppose the measure and, in general, the Democrats' majority in the Senate relies on a tie-breaking vote from Vice President Kamala Harris. That means that if just one member of the Democratic caucus votes against the resolution, it will be harder to pass it.
Brendan Pederson
