For years, predatory lenders have sought ways to avoid state interest rate limits. One scheme has been the “rent-a-bank” scheme. Under this scheme, a non-bank lender finds a bank willing to be the nominal originator of the non-bank lender’s high-cost loan, because banks are generally exempted from complying with state interest rate laws. State regulators, state attorneys general, and consumers have had success in the courts stopping these schemes based on a legal doctrine referred to as the “true lender” doctrine, and there are only a handful of rent-abank schemes underway today. But the OCC has recently proposed a rule gutting that doctrine, which would stamp the agency’s blessing on rent-a-bank schemes with national banks, trample state laws, and invite a flood of rent-abank schemes across the country. The FDIC may soon do the same, which would stamp the same blessing on rent-abank schemes with state-chartered banks.
