Since the time of the American Revolution, usury rate caps have been used by states to protect consumers from exorbitant interest rates. The Founding Fathers understood how important these interest rate caps were in ensuring access to affordable, clean credit for consumers. However, these protections are now in jeopardy all across the country, including in Indiana.
In October 2020, the Office of the Comptroller of the Currency issued a rule that purported to rectify the confusion in the lending market regarding where a loan came from and who was in fact the “true lender” of a loan. Their solution for this discrepancy was to declare, if a state or federally chartered bank was merely named in a loan agreement, they were considered to be the “true lender” of the loan. This means that predatory lenders operating in Indiana, a state that already allows payday loans at 391%, could simply partner with an out-of-state bank, name that bank in the loan agreement and use that bank’s privileges to charge even higher interest rates anywhere they wanted, including Indiana. This scheme, called “Rent-A-Bank,” directly evades the protections put in place by states to protect their consumers.
However, there is a solution. On March 25, a Congressional Review Act was introduced to Congress by Rep. Garcia and Sens. Van Hollen and Brown. This resolution is incredibly straightforward—it simply rescinds this terrible rule from ever going into effect. It will immediately stop this horrible “Rent-A-Bank” scheme and return the power of protecting consumers to state governments.
More than 340 advocacy groups, including 21 from Indiana, have already signed on in support of this resolution. It is now time for Sens. Mike Braun and Todd Young to vote yes and pass this resolution today.•
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Andrew Bradley
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