WASHINGTON, D.C. - Now that former President Donald Trump is out of office, U.S. Sen. Sherrod Brown is using his chairmanship of the U.S. Senate committee that oversees the banking system to overturn regulations the Trump administration passed in its waning days that he views as anti-consumer.
On Thursday, Brown joined a Democratic colleague on the U.S. Senate Committee on Banking, Housing and Urban Affairs, Maryland Sen. Chris Van Hollen, to introduce legislation to repeal the so-called “True Lender Rule” Trump’s Office of the Comptroller of the Currency finalized in the administration’s final months. The pair say the Trump administration rule lets predatory lenders skirt state laws that curb interest rates on loans and allows them to prey on vulnerable consumers.
Brown also introduced a resolution to overturn procedures the Securities and Exchange Commission finalized late last year that affect how shareholders can present proposals at corporate meetings. Under the regulation Brown is fighting, shareholders who introduce resolutions at corporate meetings must own a larger share of company stock for a longer time period than was previously needed.
Brown is using a 1996 law called the “Congressional Review Act” for both efforts. It allows a new Congress to repeal federal agency rules that were passed during the last 60 working days of the previous Congress. According to the Congressional Research Service, it has been used to overturn 17 rules. Sixteen of them were Obama administration rules that Republicans who controlled Congress and the White House in 2017 nixed after Trump took office. The rules Republicans overturned included a stream protection measure and Consumer Financial Protection Bureau rules on auto lending and arbitration.
Congressional Review Act measures must pass both chambers of Congress with a simple majority. After that, the president must sign them. Because presidents aren’t likely to sign resolutions that overturn rules issued by their own administrations, the process is most likely to be used after elections where the incumbent or the incumbent’s party loses and both chambers in Congress are aligned with the incoming president.
Other U.S. Senators are trying to use the procedure to reverse Trump administration rules set by the Equal Employment Opportunity Commission that critics say makes it harder for workers to obtain justice if they’ve been discriminated against at work, and to stop a rule that limits the Environmental Protection Agency’s ability to regulate methane, a greenhouse gas that environmental groups say contributes to climate change.
Brown’s office says April 2 is the deadline to introduce Congressional Review Act efforts in the current Congress and they must pass within 60 Senate session days of Feb. 2. He hopes his measures will be voted on before June.
Brown says the SEC rule he wants to overturn makes it harder for small shareholders to submit proposals for consideration by all shareholders at corporate annual meetings, and to repeatedly resubmit them as a way to raise awareness of issues and get companies to eventually adopt them.
“These rules were yet another ploy by the Trump Administration to undermine shareholder democracy,” said a statement from Brown. “Last year’s changes to the SEC shareholder proposal rule made it much harder for working families and investors to hold corporate management accountable. By raising eligibility and resubmission thresholds for shareholder proposals, the rules take away an important tool to push for better corporate governance, increase transparency, and address the gender pay gap. Congress must repeal the rule, and we need to find ways to increase shareholder participation and to make executives more accountable.”
Brown says the “True Lender Rule” he wants to overturn “eviscerates state consumer protection laws and allows unregulated payday lending across the nation.
“For years, under both Democratic and Republican administrations, federal regulators cracked down on abusive “rent-a-bank” schemes in which payday lenders funnel their high-interest, predatory loans through national banks to evade state interest rate caps,” said a separate Brown statement. “The OCC’s rule is a complete reversal of this policy, a betrayal of hard-working American families, and a shameful attack on states’ ability to protect their citizens from predatory loans.”
According to Reuters, financial technology firms had sought the “True Lender Rule” to get legal certainty on whether state or federal rules applied when they partner with traditional lenders to issue loans. Democrats say the rule is actually meant to let those firms evade state usury laws and rate caps by partnering with banks that are subject to looser federal lending rules.
They say states and the District of Columbia have rules in place to protect consumers from predatory loan rates but federally insured, state-chartered banks are exempt through the Federal Deposit Insurance Act. The OCC rule allows non-banks to use bank partnerships to skirt state laws and charge outrageous annual percentage rates that have gone as high as 179%, they say. They describe the arrangements as “rent-a-bank schemes,” where the bank attaches its name to the transaction while the customer deals entirely with the non-bank lender, who markets, underwrites, arranges, and collects payments on the loan.
Republicans in Congress argued the change helped American consumers and businesses.
A 2020 letter in support of the measure signed by House Financial Services Committee Republicans including Rocky River’s Anthony Gonzalez and Miami County’s Warren Davidson said it the rule would resolve lawsuits filed against non-bank financial technology companies that partner with banks to originate consumer loans. The lawsuit plaintiffs claimed the financial technology companies weren’t “true lenders” or were engaging in a “rent-a-charter” scheme, and “therefore, the interest rate cap of the borrower’s home state, rather than that of the overseeing sponsor bank, should apply,” their letter said.
“The uncertainty surrounding this issue stemming from the pending litigation casts doubt on loans made under the bank-fintech partnership model and could reduce the availability of credit in affected areas,” the GOP letter continued. “Third-party loan originations are subject to the same supervisory scrutiny as a bank-originated loan when there is a bank-fintech relationship. Given that these cases claim a lack of third-party supervision by the banks in question, we believe the OCC and FDIC (Federal Deposit Insurance Corporation) have the obligation and the necessary statutory authority to promulgate rules to clarify which entity is the “true lender.’ “
Consumer organizations praised Brown’s effort to overturn a rule that enables predatory lending.
“Congress must overturn this rule to safeguard hard-fought consumer protections that protect Americans’ pocketbooks and peace of mind,” said a statement from Kalitha Williams, project director of Policy Matters Ohio, a left-leaning nonprofit, nonpartisan state policy research institute with offices in Cleveland and Columbus.
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