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Update: President Biden Signs Joint Congressional Resolution Striking Down “True Lender” Rule

In late 2020, the Office of the Comptroller of the Currency (OCC) issued the “true lender” rule, which was immediately met with criticism.  Shortly thereafter, several State Attorneys General, led by New York Attorney General Letitia James, sued the OCC seeking to invalidate the rule.  The Attorneys General and other critics argued that it enabled predatory lenders to prey upon unsuspecting customers by facilitating “rent-a-charter” arrangements.  Such arrangements allow a third-party lender to “rent” a national bank’s charter for a fee, which in turn enables the third-party lender to avoid certain state usury limits.

Last month, we wrote about the Senate’s resolution to repeal the “true lender” rule, and at that time, the resolution was pending in the U.S. House of Representatives.  On June 24, the House passed the resolution and on June 30, President Biden signed the Congressional Review Act resolution voiding the rule.  The following week, the Attorneys General voluntarily dismissed their lawsuit, as its intended outcome had been achieved.  Critics of the “true lender” rule praised this development as a victory for consumer protection.

Moreover, according to New York AG James, the use of the Congressional Review Act means that the OCC cannot issue a substantially similar rule without Congressional authorization.

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