Michigan Attorney General Dana Nessel in January joined 21 other state attorneys general in opposing a proposal by the Office of the Comptroller of the Currency to exempt entities that are not national banks – including payday and other high-cost lenders – from state usury laws. Usury laws prevent predatory lenders from taking advantage of consumers by limiting the interest rates that can be charged on loans.
In a news release, Nessel’s office said that, if finalized, the OCC’s proposed regulations would enable predatory lenders to circumvent those caps through “rent-a-bank” schemes in which banks act as lenders in name only, passing along their state law exemptions to non-bank payday lenders. Those arrangements could allow lenders to charge consumers rates that exceed the rates permissible under state laws.
“My office has a responsibility to act when Michiganders are at risk of deceitful and abusive loan practices,” Nessel said in the release. “If the OCC succeeds, more consumers risk becoming victims of predatory and misleading tactics by payday lenders, and that’s more than enough reason for my colleagues and me to oppose this proposal.”
State law protects residents from predatory lending by non-banks such as payday, auto title, and installment lenders. Congress affirmed that role with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, preserving more protective state laws. The new regulations proposed by the OCC would extend the National Bank Act exemption for federally regulated banks to non-bank debt buyers, such as payday lenders. Nessel’s office said the proposed rule is a reversal in policy that could evade state laws that target predatory lending.
The attorneys general argue that the OCC’s attempt to extend the National Bank Act preemption to non-banks conflicts with the National Bank Act and Dodd-Frank Act, exceeds the OCC’s statutory authority and violates the Administrative Procedure Act.
Nessel joins the attorneys general of California, Colorado, the District of Columbia, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Virginia, Washington and Wisconsin.