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The attorney generals of the seven states have accused the OCC of overstepping its authority and preempting the state laws. They note that the “True Lending” rule will allow banking lenders to bypass state interest rates.
As per the recent filing on Tuesday, January 5, with the Southern District Court of New York, seven US states sued crypto-friendly banking regulator – the Office of the Comptroller of the Currency (OCC) – and acting comptroller Brian Brooks.
The recent case filing comes amid the “True Lending” rule implemented by the OCC in late December 2020. The seven Democratic attorneys have said that these rules over the regulatory authority and would allow lenders to bypass state interest rates maximums.
Why US States Are Not Satisfied with the OCC Decisions
Before implementing last month, the OCC already brought that “True Lending” rule in October 2020. The rule notes that a loan involving a national bank as a lender can rely just on OCC’s guidance instead of individual states. Now, the conflict here is that states have implemented the anti-usuary provisions for a long time. This prevents any predatory lending issue while capping the interest rates. Thus, the complaint filed by seven states notes:
“While the OCC pays lip service to condemning predatory lending, it gives its wholesale endorsement to lending relationships predicated on evasion of usury laws designed to protect consumers.”
In the complaint, the state authorities have accused the OCC of overstepping its authority and preempting the state laws. They also state that the OCC has violated the Administrative Procedure Act by rushing its “True Lending” rule.
However, the OCC has argued that its approach is clear along with a uniform standard that will still hold banks accountable to the federal laws it imposes.
Accusing Trump Administration of Unleashing Predatory Lenders
New York Attorney General Letitia James is leading the lawsuit along with the attorney generals of Colorado, California, New Jersey, North Carolina, Minnesota, Massachusetts, and the District of Colombia. In a statement accesses by The Hill, James said:
“This rule would be a mistake at any time, but the Trump Administration’s attempts to unleash predatory lenders on unsuspecting New Yorkers in the midst of a pandemic is cruel and heartless”.
The regulators have thus asked the courts to “declare that the OCC violated the APA because its True Lender Rule is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law”.
Interestingly, all this comes at a time just a day after the OCC passed a path-breaking rule allowing banks to run blockchain nodes and facilitate stablecoin payments.