Commonwealth of Virginia
Office of the Attorney General
202 North Ninth Street
For media inquiries only, contact:
Charlotte Gomer, Director of Communication
Mobile: (804) 512-2552
ATTORNEY GENERAL HERRING DEFENDS STATE PROTECTIONS FOR VIRGINIA BORROWERS
~ Herring urges Congress to rescind OCC proposal that would exempt payday and other high-cost lenders from state usury laws, allowing lenders to charge borrowers astronomical interest rates ~
RICHMOND – Attorney General Mark R. Herring has joined a bipartisan coalition of 25 attorneys general in urging Congress to use the Congressional Review Act (CRA) to rescind the Office of the Comptroller of the Currency's (OCC) True Lender Rule, that would exempt payday and other high-cost lenders from state usury laws. State usury laws prevent predatory lenders from taking advantage of consumers by limiting the interest rates that can be charged on loans.
Attorney General Herring and his colleagues issued a letter calling for the OCC's True Lender Rule to be rescinded because it would enable predatory lenders to circumvent state interest rate caps through "rent-a-bank” schemes, in which banks act as lenders in name only,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. These arrangements would allow lenders to charge consumers rates that far exceed the rates permissible under Virginia usury laws.
"This proposed rule is a holdover from the previous administration, that showed time and again that it wanted to protect lenders instead of protecting consumers,” said Attorney General Herring. "As attorney general, I have made it a top priority to protect Virginians from predatory lenders, who prey on and exploit individuals who have found themselves in hard financial times. Virginia's usury laws were put in place to protect consumers from extremely high interest rates and I will continue to do all I can to make sure that high-interest lenders are never exempt from these critical laws.”
Congress can prevent the implementation of the OCC's True Lender Rule by repealing the rule under the CRA. In today's letter, Attorney General Herring and his colleagues are urging Congress to pass pending House and Senate resolutions introduced March 26, 2021 that use the CRA to repeal the True Lender Rule.
The National Bank Act permits federally-regulated banks to charge interest on loans at the maximum rate permitted by their "home” state, even in states where that interest rate would violate state usury laws. For years, non-bank entities such as payday, auto title, and installment lenders have attempted to partner with national banks to take advantage of banks' exemptions to state interest caps in order to offer ultra-high-rate loans in states where such loans are forbidden. Courts have scrutinized these lending relationships and concluded that because the national bank is not the "true lender” of the loan, state-law usury caps apply to the non-bank lenders.
The OCC's True Lender Rule would prevent courts from intervening if a national bank is either named as the lender on loan documents or the bank initially "funds” the loan. Further, the rule would allow the bank to instantly sell the loan and never take any meaningful risk on it. This rigid, formalist approach will provide an advantage to only banks and predatory lenders, at the expense of hardworking and unsuspecting consumers. Moreover, the rule represents a stark departure from decades of OCC policy admonishing national banks from entering into these sham "rent-a-bank” arrangements.
Attorney General Herring created the OAG's first Predatory Lending Unit to investigate and prosecute suspected violations of state and federal consumer lending statutes, including laws concerning payday loans, car title loans, consumer finance loans, mortgage loans, mortgage servicing, and foreclosure rescue services. The Unit also focuses on consumer education so Virginians are aware of the potential risks of these loans, as well as alternatives.
During his administration, Attorney General Herring's Predatory Lending Unit has successfully brought enforcement actions against, among others, motor vehicle title loan lenders, online payday lenders, mortgage servicing companies, and pawnbrokers.
If Virginia borrowers believe their rights have been violated, or that their lenders may have violated lending statutes, they should contact Attorney General Herring's Consumer Protection Section to file a complaint or to get additional information about any consumer protection related matter:
- By phone: (800) 552-9963
- By email:
- Online Complaint Form
- Online Contact Form
Joining Attorney General Herring in sending today's letter are the attorneys general of Arkansas, California, Colorado, Connecticut, District of Columbia, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, South Dakota, Vermont, and Wisconsin.
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