ATTORNEY GENERAL HERRING  DEFENDS STATE PROTECTIONS FOR VIRGINIA BORROWERS

~ New OCC proposal would exempt payday and other high-cost lenders from state usury laws, allowing lenders to charge borrowers astronomical interest rates ~

RICHMOND(January 22, 2020) – Attorney General  Mark R. Herring  has joined a bipartisan coalition of attorneys general in opposing a proposal by the Office of the Comptroller of the Currency (OCC) to exempt payday and other high-cost lenders from state usury laws. Usury laws prevent predatory lenders from taking advantage of consumers and charging high interest rates on loans. If finalized, the OCC's proposed regulations would enable predatory lenders to circumvent these 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 allowed under Virginia law.  

"The Trump Administration has continued to show that its prerogative is to protect predatory lenders instead of protecting borrowers and this proposed OCC regulation change is no exception,” said Attorney General  Herring. "One of my top priorities as attorney general has been to protect Virginians from predatory lenders who exploit folks who are generally just trying to get out of a tough financial situation. Virginia's usury laws are in place to protect borrowers from extremely high interest rates and I will keep fighting to make sure that predatory lenders are never exempt from these important laws.”

States have long played a critical role in protecting residents from high-cost loans. While federal law provides a carve out from state law for federally-regulated banks, state law continues to protect residents from predatory lending by non-banks such as payday, auto title, and installment lenders. Congress affirmed that role with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, preserving more protective state laws. Yet, the new regulations proposed by OCC would extend the National Bank Act exemption for federally-regulated banks to non-bank debt buyers such as payday lenders. The proposed rule is a sharp reversal in policy and a deliberate attempt to evade state laws that target predatory lending. 

Attorney General  Herring and his colleagues argue that the OCC's attempt to extend National Bank Act preemption to non-banks conflicts with the National Bank Act and the Dodd-Frank Act, exceeds the OCC's statutory authority, and violates the Administrative Procedure Act. 

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: This email address is being protected from spambots. You need JavaScript enabled to view it.

·       Online Complaint Form

·       Online Contact Form

Joining Attorney General Herring in filing this comment letter are the attorneys general of California, Colorado, DC, Hawaii, Illinois, Iowa, Maryland, Massachusetts, Michigan, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Virginia, Washington State, and Wisconsin.

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