House Democrat Leads Efforts Against Key Consumer Protection

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The House of Representatives returns to sit this week and, quite rarely, several measures taken by the Senate are awaiting action. The Upper House has put forward three “resolutions of disapproval” under a statute called the Congressional Review Act (CRA), which allows Congress to overturn certain executive orders. The three resolutions, respectively, will address lax Trump-era methane emissions standards, overturn Equal Employment Opportunity Commission rules that create barriers to credible employee discrimination complaints, and overturn the Office of the Comptroller’s (OCC) “truth”. lender ”, which allows predatory lenders to evade government interest rate caps. Representative of the Speaker of the House of Representatives Nancy Pelosi Henry Connelly said Avenue that some or all of these resolutions will get a vote during the June working period.

The latter, in accordance with true creditor rule, entered the Senate in a 52-47 bipartisan vote, voted in by three Republicans. Given this dynamic and the difficulty of making a viable argument that lenders should be able to charge 400 percent on a consumer loan when the government caps that rate to 30 percent, a majority vote in the House of Representatives would appear to be quite guaranteed. But this is not the case.

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Rep. Maxine Waters (D-CA), Chair of the House Financial Services Committee, asked the entire House to pass a resolution “As soon as possible… “But majority support has yet to be received as members and staff begin to delve deeper into a rather complex issue.

Importantly, according to six sources with knowledge of the situation, Financial Services Representative Josh Gottheimer (NJ) lobbied his colleagues to vote against a true lender decision, threatening passage and potentially exposing thousands of consumers to usurious interest rates. With Gottheimer leading the opposition and a small Democratic majority in the House of Representatives, only a handful of members, if not Republicans, could reject the resolution.

It may come as a surprise that the House of Representatives will have a heavier push than the Senate on the creditor’s true decision. But with financial issues in the lower house, it is often more difficult. For example, the Dodd-Frank Financial Reform Act strengthened in the Senate and weakened in the House of Representatives. The Financial Services Committee was historically built as a landing point for members seeking campaign donations from Wall Street, or members from neighboring neighborhoods with wealthy constituencies in the industry.

It may come as a surprise that the House of Representatives will have a heavier push than the Senate on the creditor’s true decision. But with financial issues in the lower house, it is often more difficult.

Gottheimer from the northern New Jersey dormitories represents both. He received $ 1.3 million in donations from the securities and investment industry in the latest electoral cycle, according to the Center for Responsive Politics, and an additional $ 800,000 from the real estate and insurance sectors. Gottheimer also received $ 24,900 from payday lenders. third largest support amount anyone in the House of Representatives. Since joining the Congress in 2016, Gottheimer took 6 million dollars from the financial, insurance and real estate sectors.

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“If any Democrat sabotages this bipartisan rebuke to Trump’s scheme of allowing predatory lenders to bypass government consumer protection measures, it is definitely not on the grounds that 400 percent interest rate is good policy,” said US President Kyle Herrig. Avenue… “If the legislator behaves as if it owes its entirety to industry money, it may be because it is.”

On another level, Gottheimer’s position on the bill is at odds with his public persona. He is the co-chair Problem solving advicewho is committed to bipartisan solutions. The CRA’s current creditor is one of the few bipartisan bills passed by the Senate this year. In addition, one of the cases most related to the true rule of the creditor takes place in the state of New Jersey, where Gottheimer resides.

A spokesman for Gottheimer’s office did not respond to a request for comment.

More than half of all states cap the annual interest rate (APR) on consumer loans; New Jersey, in fact, limits individual consumer lending rates by 30 percent. But the National Bank Act of 1864 allows state law to “prevail” on federally registered banks that are not domiciled in the state. Some financial masters have come up with the idea that if you launder non-bank loans through a federal bank, you can get preferential protection, charge any interest rate you want, and avoid state restrictions. This is especially useful for online fintech lenders looking to offer loans across the country.

It is sometimes called Bank lease scheme… The bank will have no real interest in the loan, but as long as its name is indicated somewhere in the loan agreement, it becomes a “real” lender in order to avoid interest rate caps. Non-bank lenders love this because it gives them the ability to charge more; banks like this because they get paid for doing nothing but putting their name on some documents. The only losers here are borrowers who are paid higher interest rates than is legal in their countries.

Banks have partnered with fintech and other lenders on a variety of lending relationships and view any consumer protection efforts as potentially fatal to those efforts.

Opportunity Financial, online lender, uses this bank lease scheme in partnership with FinWise Bank, providing loans at 160 percent per annum in 24 states and the District of Columbia. Opportunity Financial Political Action Committee donated to Josh Gottheimer… Other fintech companies that partner with banks to provide loans are likely to be interested in this issue, offering another potential source of campaign funds.

Another example of a bank lease is Gottheimer’s home state. A restaurant owner in Paterson, NJ received USD 67,000 loan in 268 percent per annum, exit is out of step with state law. World Business lenders were able to make this loan because they laundered it through Axos Bank, whose federal bank charter is administered by the OCC. The pledge was the property of the owner and is now facing foreclosure. Paterson is located in the constituency adjacent to Gottheimer’s.

Supreme Court made bank lease schemes illegal in 2015, but Donald Trump’s JCC “clarified” the statute based on fictional doctrine that it was decided that it was a “well-established law”. Since the OCC rule was completed at the end of the Trump administration, Congress has been able to use the CRA to destroy it, quickly re-establishing state consumer protection. President Biden expressed his support for permission.

Senate transferred the true creditor to the CRA May 11th supported by Republican Senator Susan Collins (R-ME), Cynthia Lummis (R-WY) and Marco Rubio (R-FL). Rep. Chui Garcia (D-Il) has introduced an accompanying measure in the House. The resolution received the support of the editorial office in St. West Virginia as well as Alaska, as well as Republican attorneys general from Arkansas, South Dakota and Nebraska (where voters passed the interest rate cap last year with 83 percent of the vote) are in support.

“The bipartisan Senate vote to overturn the bogus lender rule is a demonstration of disapproval of the harmful bank lease model used by predatory payday and installment lenders to issue three-digit interest rate loans that are illegal nationwide,” said Rachel Gittlman. Financial Services and Consumer Federation of America manager. “The House of Representatives must act to repeal a rule that is doing active harm right now by defending this predatory model.”

Lawyers held briefings on Capitol Hill to educate members of the House of Representatives, but while there was little resistance from the Senate, opponents were more active in the House of Representatives. The American Bankers Association and several other financial trading groups have opposed the resolutionarguing that this would reduce access to credit, and if by “credit” you mean highly overpriced loans that are well above government interest rates, then this is true. Banks have partnered with fintech and other lenders on a variety of lending relationships and view any consumer protection efforts as potentially fatal to those efforts.

“They might try to shroud themselves in the mantle of innovation, or claim to help people access credit,” said Linda June, senior policy advisor to Americans for Financial Reform, “but they are actually making it easier for lenders to get into them. debts. a burden they cannot afford. “

Others argued that if the rule were to be repealed under the CRA, agencies like the OCC would not be able to enact any “nearly identical” rule, tying their hands to rulemaking. But the true lender rule is only four sentences, and adding some sort of fences or other caveats to it would make it substantially different. What’s more, the Trump administration passed several rules after the CRA rulings overturned them, and no court intervened to block them.

Advocates believe that given enough time, they can convince members to support the resolution. But it’s an obscure, shaky question, and when members of bankers like Gottheimer make it a matter of “confidence,” and maintaining a lending partnership cloud the waters.

Alexander Sammon provided the reportage.



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