To minimize Background Noise please click the mute button , until its your turn to speak or ask questions. You should have one box that will show how much time is remaining. For witnesses, youll have five minutes for your opening statements. For all senators, the Fiveminute Clock applies for your questions. 30 seconds remaining, youll hear a Bell Ring to remind you your time is almost up. It will ring again at zero. If there is a technology issue, well move to the next Witness Or Senator until its resolved to simplify the process, Senator Toomey and i have agreed to go by seniority for this hearing. Emerson teaches us that history is a battle between the innovators and conservatives. The innovators find ways to make the government work better for everyone. The conservators, the corporations, the special interests, the elite who have amassed Wealth And Power at the expense of workers and their families, they never give up. So it is with predatory lending. In the late 90s, Pay Day lenders were desperate to find a way to evade State Laws that limited them from charging Interest Rates that trapped people in a cycle of debt they cant get out of no matter how hard they work. They came up with what the occ called rent a charter. What we now know as the rent a Bank Scheme, because banks are generally not subject to these State Laws, Pay Day lenders funnel their loans through a small number of willing banks. It looked like the banks were making the loans when really, it was the Payday Lenders. Federal regulators, republicans and democrats, saw through this ruse. Under president bush, the occ described these schemes as abusive, their words, and later warned about banks that rent out their charters charters to third parties who want to evade state and local Consumer Protection laws. In the years that followed, the occ and fdic shut down a series of these schemes by Pay Day lenders and banks. States from across the country also stepped in to crack down. The Georgia Legislature in 2004 passed a law to crack down on rent a Bank Schemes. Regulators in West Virginia and the ranking members in my Home States of Pennsylvania And Ohio and New York and Maryland And Other States followed suit. States also passed new laws to limit Interest Rates on Payday Loans. Since 2010, colorado, illinois, virginia, last year nebraska, all passed laws to cap Interest Rates on Payday Loans at 36 . Still a very high number. Several other states, including California And Ohio also passed laws to limit the interests that can be charged. These laws passed with overwhelming bipartisan support. More than 75 of voters in Nebraska And South dakota supported the ballot initiatives to cap Interest Rates on Payday Loans. In recent years, new fed caps have emerged to offer small loans at affordable rates. Of course, the Payday Lobby didnt give up. We now have a separate group of online Payday Lenders resurrecting the rent a Bank Scheme. And not even attempting to hide it. One online lender recently told its investors it would get around californias new law by making loans through bank sponsors that are not subject to the same proposed State Rate limitations. In other words, said theres no reason they would not be able to replace their California Business with a bank program. Given the broad by the support for these laws, we all hoped that the Trump Occ would take action and crack down on these schemes, schemes that have been rejected by voters and Legislatures State after state. The last republican legislation stood up for consumers. Last year, the occ issued the true Lender Rule, overruling voters of both parties and giving a free pass to these abusive rent a Bank Schemes. The rule was rushed through by the active concontroller who cut comptroller who cut his teeth helping banks ruthlessly foreclose on homeowners and a Deputy Comptroller with deep ties to the Payday Lobby. Republicans have selected the two of them to be witnesses at todays hearings. The occ and mr. Brooks have argued the true Lender Rule is necessary so the agency has the necessary authority to oversee banks relationships with lenders but the occ didnt lack any authority when it cracked down in the early 2000s. The occ also attempted to justify its efforts by claiming that it promotes innovation and provides certainty to the markets. The only certainty we need is the certainty that workers and their families will be protected from these exploitive Interest Rates. The last thing we should be doing is encouraging lenders to in their words, innovate. We just knows that means new ways to get away with ripping people off. Thats why across the country, a broad bipartisan coalition is asking congress to overturn the true lending rule. Support includes the national support of the evangelical, southern baptist convention, other members of the faith and just lending coalition. That coalition wrote to congress the occ Lender Rule would create a hole big enough to drive a truck through. I would like to submit the expire letter for the record along with letters from a bipartisan group of state attorneys general, 375 consumers, civil rights labor, small business organizations asking congress to overturn the true Lender Rule. Today, well hear from one of the members of the faith coalition, senior pastor at Friendship West Baptist church in dallas. Well hear today from North Carolina Attorney general josh stein. He represents a bipartisan coalition of state attorneys general, including the republican attorneys general of Nebraska And South dakota who have called on congress to overturn the occs true Lender Rule. This comes back to one question whose side are you on . You can stand on the side of Payday Lenders that brag about their creativity in avoiding the law and find new ways to prey on workers and their families or we can stand up for families and small businesses and the state attorneys general and state legislatures who have said enough and are trying to protect themselves and their states from predatory lending schemes. Issues that come before this committee are complicated. They divide people. There are thorny nuances to consider. This really isnt one of them. Its simple stop predatory lenders instead of encouraging them. Ranking member to me, youre recognized. Thank you. Ranking member to meet ranking Member Toomey, your recognized. Thank you. Senator toomey thank you, mr. Chairman. In the last decade, weve seen financial technology companies driving amazing new innovations in financial markets. Fin techs have developed Technology Oriented Solutions to meet consumers needs. As many banks have exited the personal loan market, Fin Techs have filled the gap and today, they issue nearly 40 of all the unsecured personal loans in america. In recent years, both nationally charted and State Charted Banks and credit unions have begun to partner with Fin Techs to offer improved products and reach more customers. This is particularly beneficial for community banks who often lack the resources to develop banking technology. In fact, 65 of community banks consider Fin Tech partnerships important to their business strategy. And these partnerships also generate significant consumer benefits. Bank Fin Thec partnerships generate efficiencies that can lower the price of financial products, expand Consumer Choice and Increase Competition and these bank Fin Tech partnerships offer a wide variety of credit products, not just small dollar loans but credit cards, Home Equity lines of credit. Personal loans, auto lines, small mortgages as well. Unfortunately, recent Court Rulings have applied different legal tests to determine which partner is legally responsible for the loans, and these tests have created uncertainty that threaten to reduce the credit for customers. Thats why theres been bipartisan congressional Support And Industry support for clarifying the issue. So last year, the occ provided its true Lender Rule to provide regulatory clarity and the rule holds that a national bank it holds a national bank responsible for a loan when at the time that the loan is originated, the bank is named in the Loan Agreement or funds the loan. This allows the occ to supervise these loans and ensure that the bank is not evading the law, Consumer Protection laws. Contrary to some claims, the rule is not intended to facilitate rent a Charter Arrangements where banks dont comply with the law. In fact, the Occs Rule does just the opposite. A rent a Charter Arrangement means that no party takes Compliance Responsibility for a loan. Thats where the true Lender Rule comes in and is different. It ensures that the national banks that partner with third parties are accountable for the loans they issue through these partnerships and it allows the occ to supervise the origination of these loans. The current acting director of the occ, not a political Appointee But One who has been a career civil servant for more than 30 years wrote to congress making this very point. The true Lender Rule also provides the clarity needed for bank Fin Tech partnerships to flourish and for national credit markets to function. For over four decades, federal law has allowed both nationally charted and State Charted Banks to export the State Law governing Interest Rates from their Home State where they are based. The true Lender Rule simply allows Fin Techs to partner with banks, which already operate with these efficiencies. Absent the true Lender Rule, uncertainty about who the true lender really is creates uncertainty about whether the bank can export its Interest Rate. If the bank guesses wrong, the loan could be unenforceable. That uncertainty jeopardizes the viability of the bank Fin Tech partnerships. More importantly, it disrupts the functioning of the Secretary Market for credit. Why does the Secretary Market matter . Because when a bank sells a loan, it frees up capital to make another loan. This is very well understood in the mortgage space, when a bank sells a mortgage to the gses, it frees up the capital to lend to an additional home buyer. The same principle applies in the secondary market here. Banks will likely issue far fewer loans if they cannot reliably sell those loans into the secondary market. Fewer loans means less access to credit, less access means higher costs and less willingness to provide the limited supply of credit to higherrisk borrowers. The result, the most marginalized consumers are hit the hardest. This isnt just my opinion. Almost 50 leading financial economists from prominent universities including harvard, stanford, university of pennsylvania made these very points in an amicus brief in support of the occs true Lender Rule. We have empirical evidence too. Studies have shown that after a 2015 Court Ruling created uncertainty around the ability to export Interest Rates to New York, it became significantly harder to get loans in New York, especially for highrisk borrowers. Despite the importance of the true Lender Rule, some i know want to rescind it using the congressional Review Act, and i expect the motivation is that overturning the rule would subject more loans to state Interest Rate caps. But that may not be the effect. I think the more likely effect is that these loans simply wont get made. Thats why price controls are not the answer. Theyll exclude people from the banking system. Theyll restrict the Credit Supply and make it harder for lowincome consumers to access credit that they need. The best form of Consumer Protection is a robust, competitive market, preserving regulatory Certainty And Clarity through the true Lender Rule, advances that cause. Thank you, mr. Chairman. Chair brown thank you, ranking Member Toomey, for your comments. Ill introduce the witnesses. Mr. Josh stein is Attorney General of North Carolina, as Attorney General he works to protect North Carolina families from crime and consumer fraud. He previously served as a state senator, as a deputy Attorney General in the North Carolina department of justice. Ms. Lisa the director of State Policy at the center for responsible lending. She works with global organizations and lawmakers to eliminate abusive Lending And Debt collection practices in her state. She also advocates on the national level on abusive Debt Collection and Debt Settlement practices as well as predatory Auto And Student lending. Dr. Frederick hanes is a senior pastor, Activist And Educator in dallas. With the Friendship West Baptist church in dallas. Dr. Hanes currently serves as chairman of the board of the Samuel Dewitt Proctor conference, Board Member of the conference of national black churches and the national action member, and a member of the board of trustees for pall quinn college. Mr. Brian books is the former acting controller of the currency prior to becoming acting controller he served as senior deputy for chief senior Deputy Comptroller chief operating officer. Before joining occ, he worked at fannie mae, and meyers and one west bank. Mr. Charles w. Telemires a professor of financial institutions at columbia business school, director of the business Schools Program for financial Studies Initiative on Finance And Growth in emerging markets and a professor at Columbia School international public affairs. He previously served as senior Deputy Controller for the occ. Welcome to our witnesses. General stein, well start with you. Thanks for joining us. General stein mr. Chairman, members of the committee. My name is josh stein, Attorney General of North Carolina, and i am pleased to have this opportunity to discuss the occs socalled true Lender Rule. Its more accurate to call it the fake Lender Rule because predatory lenders dress up their loans to try to make them look as though they were made by an entity exempt from state Usury Law, such as a national bank regulated by the occ. If not reversed, this new rule provides a get out of jail free card to predatory lenders who violate State Laws limiting Interest Rates and fees on consumer loans. For nearly 200 years, state and federal courts using the true Lender Doctrine have recognized and outlawed subterfiduciaries that put form over substance. This doctrine looks to whether a predatory lender retains the predominant economic interest in the loan to determine whether the predatory lender is the true lender and therefore must comply with State Rate caps. North carolina has a long history of strong laws and vigorous enforcement against unfair consumer lending. For a brief experimental period from 1997 to 2001, North Carolina law permitted Payday Lending. During that time, we learned during that time, we learned firsthand the economic damage these incredibly highcost loans inflict on working families, especially those in neighborhoods of color and near military bases. The average borrower rolled over more than eight loans at 419 , from the same store, and 1 out of 7 borrowers took out more than 19 loans per year. These loans were not a source of occasional credit as the marketing suggested, but rather a Debt Merrygoround borrowers could not get off. A 61yearold Grandmother from gardner made 9 an hour working the second shift. She wanted to buy her five grandchildren christmas presents, but she was living paycheck to paycheck. She went to an Advance America Storefront and borrowered 300. In two weeks, she didnt have the money she owed and her electric bill was due so she had to renew the loan. Like so many others, she did this over and over. After paying fees, every two weeks, for a year, in all, nearly 2,000, just to borrow 300, she was only able to repay the original loan after earning a raise to 12 an hour and scrimping on food. Due to the exorbitant Interest Rates and patterns of harmful Repeat Borrowing that buried thousands of north carolinians in debt, North Carolinas legislature allowed this law to sunset in 2001. After the sunset, most Payday Lenders complied and closed their doors. However, others, including Advance America and eight cash express, looked for ways to circumvent North Carolina law using rent a Bank Schemes. The Banks Names were placed on the loan documents, but the Payday Lenders marketed, underwrote, assumed the risk, claimed the profit and made the loans at skyhigh Interest Rates of up to 521 to North Carolina consumers. After an Enforcement Action by the thenNorth Carolina Attorney general, the North Carolina commissioner of banks held that the Payday Lender despite its rent a Bank Suber Fuge was, in fact, the true lender and therefore, subject to state Usury Law. North carolina is by no means alone in protecting our borrowers. Other states have also relied on the true Lender Doctrine to stop Payday Lenders from using rent a Bank Schemes to evade their state Interest Rate laws. This new rule threatens to upend efforts to protect our people, along with seven other attorneysgeneral, i filed a lawsuit in the southern district of New York challenging the rule and we are confident in our legal position. The congressional review process, however, provides a far more straightforward and quicker means to reverse the fake Lender Rule than does litigation. Thats why a bipartisan group of 25 attorneysgeneral recently urged congress to disapprove this new rule, protecting our constituents is our highest calling, and i am proud to stand up for our working north carolinians like anita. As senators, you have the authority to help people like her all across this country. Its an awesome power and i ask that you exercise it. Thank you for your time. Thank you, General Stein. Ms. Stefler, youre recognized with five minutes. Good morning, chairman, ranking member, and members of the committee. Im the director of State Policy at the center for responsible lending, an affiliate of south credit union. Thank you for the opportunity to discuss the single greatest threat to the ability of states to protect their residents from payday and other highcost loans. With the Blessing And Facilitation of Federal Regulators, we are seeing the reemergence of predatory rent a Bank Schemes. In these schemes, a nonbank lender makes loans at rates higher than allowed by State Law by renting out the Name And Charter of a wellknown bank that is exempt from state Interest Rate caps and then the nonbank lender attempts to claim that exemption for itself. These partnerships are shams, created with the express purpose of skirting State Law, and they trap consumers in unaffordable loans. The occs true Lender Rule will pave the way for more of these schemes to proliferate. The rule would hastily proposes and finalize a week before the 2020 election with the agency failing to meaningfully address concerns raised in the more than 4,000 comments filed. The rule facilities rent a Bank Schemes just like those used by Payday Lenders in the early 2000s until federal and state regulators shut them down. The rule overturns the decadeslong Occ Position that these sham arrangements are an abuse of the national charter. The occ also ignored the procedural requirements in the dodd frank act established by congress to prevent this exact kind of regulator. It is no mystery what happens when these protections are removed. The cycle of financial instability is the reason states adopted these protections in the first place. The harms fall mostly on working families and communities of color. That is why faith leaders, community and civil rights groups across the country, along with those united in opposition to this rule, as well as attorneys general and state regulators from both parties. How the Occs Rule will work is already clear because occregulated banks are enabling some of the most predatory loans on the market. For over one year, i bank has been helping with Installment Loans at rates as high as 179 , apr for loans up to 5,000. This outrageously priced loan is illegal in almost every state, yet the Occ Rule invites predatory lenders to evade State Laws by paying a bank to put its name on the paperwork. Another occregulated bank, Access Bank, rents its Name And Charter to the predatory small Business Lender World business lenders. Wbl loans run in the tens and even hundreds of thousands of dollars and carry rates as high as 268 , often secured by the borrowerss personal residence. These loans are causing small business owners to lose their homes. The occ is aware of these sham arrangements, but it has taken no public action against the banks and even directly supported wbl. Clearly, the agencys assurances that will rule will not allow harmful loans are belied by these facts and the agencys own actions. People in communities across the country are reeling from the economic impact of covid19. As we look to create a strong recovery for all, one way not to help these families is to eviscerate state Interest Rate laws. Congress and the financial regulators should focus on ensuring a fair financial system that serves all consumers, rather than creating new avenues for predatory lenders to drive consumers further away from the financial mainstream. Because congress has not yet enacted a federal Interest Rate ceiling, state Interest Rate limits are the only protection against highcost predatory loans. This is not a close call or even a complicated issue. The Occs Rush and illconceived rule is bad for consumers and small businesses, is bad for states rights, overturns centuries of case law, and is antithetical to the goal of an inclusive economic recovery, and it is illegal under federal law. Simply put, this rule facilitates loans illegal under State Law, not just any loans, but ones reaching 200 and 300 apr. Thats the decision here. Siding with illegal lending practices or standing up against them. We urge you to stand up against them and repeal the Occ Rule. Thank you, and i look forward to answering your questions. Thank you. Dr. Hanes is recognized for five minutes. Welcome to the committee. Good morning, Chairman Brown, ranking Member Toomey and members of the committee. Im fredlic douglas hanes iii. I serve as the pastor of Friendship West Baptist church, a congregation of 12,000 parishioners in dallas, texas. Im grateful for the opportunity to morally appeal to you on behalf of a broad and diverse faith community. The coalition includes seven baptist conventions ethics and religious liberty commissions, the national association of evangelicals, the national baptist convention, and the united States State Conference of catholic bishops, quite a diverse coalition. We are appealing to you because we must stop those who would use their greed to exploit those in need through highcost predatory Debt Traps that we consider usury. Faith groups of all traditions, representing 118 million americans mobilized to call on the cfpd to enact a strong rule addressing the an enimical Payday Lending Debt Traps. We call on you now to stop this harmful rentabank rule. Usury and economic exploitation of the poor are condemned in all faith traditions. Those who exploit the poor through predatory practices are referred to in scriptures as wolves. Predatory practitioners of rentaBank Schemes may well be referred to as wolves dressed up in the legitimacy of a bank, but the victims of such practices testified that an economic predator by any other name is still trapping the desperate in debt. These moral monsters, to use the language of james baldwin, feed their greed at the expense of the vulnerable. For years, we have worked to expose these Debt Traps clad in deceptive wardrobes from the crass neon signs that littered the neighborhoods of the needy to the polished promises of Fin Tech lenders who claim to be the saviors of families who need access to credit. The con, of course, is that the access they impose on these families is a deceitful, debt in debt booby trap, as they draw them into a machine calibrated to siphon funds out of their bank accounts until they have all but bled them dry. Many end up Filing Bankruptcy due to the moral bankruptcy of the predatory lenders who make them pay a high cost for being poor. Ive seen this in my church. I could give you many examples, but quickly, a widowed grandmother paid back 800 for a 300 loan, immoral. A young College Graduate who worked two jobs took out a Payday Loan, his mother became sick, believing it would help him get through the crunch but an Interest Rate of 450 set him up to bring him down financially. He ended up losing the car he needed to get to work. Thats immoral. Predatory Payday Car Title and installment lenders strip billions every year by replicating a dreadful disadvantageous practice and hiring lobbyists to put a halo on the devil for lawmakers and regulators. Im appalled by the harm done to those who face historic divestment, who are exploited, they suffer from economic injustice. These communities were crippled already by redlining, and now, they are being ripped off by the social violence of financial predators. For decades, banks used maps to deny loans to communities of color, and now, through rentaBank Schemes, they are using maps to locate and sell as legalized loan sharks for those same communities. Payday lenders have an ugly history of setting up shop in black and brown neighborhoods. Weve seen this firsthand in the communities surrounding our church here in dallas and research bears it out. Now, many are shifting to online loans through rentaBank Schemes and targeting the same struggling communities. That the occ would open up our communities to more exploitation when we are suffering already so severely from covid19 is immoral, its disgraceful, that the occ would give predatory lenders a way to charge 200 400 interest and even more, even in states that have worked hard to stop this predation with the 36 Interest Rate cap. That is indeed obscene and in our faith community, its sinful and demonic. We strongly oppose the occs plan to enable predatory lenders to ignore state Interest Rate caps. Please understand, true lending is really off, its a lie. Jesus said the truth will set you free. Wires will lock you up. Liars will lock you up. This is not a savior, its the seductive slavemaster and were calling upon you to reject this. Thank you, dr. Hanes, for your comments. Mr. Brooks, youre recognized for five minutes. Welcome. Thank you, Chairman Brown and ranking Member Toomey, members of the committee, thank for the opportunity to discuss the occs true Lender Rule. My testimony obviously provides more details, but i did want to highlight several issues to help members better understand the rule, what it does and doesnt do, what it achieves and what the effect would be of overturning the rule. The occ true Lender Rule clarifies when a national bank or Savings Association is the true lender of a loan and provides a bright line as to when Occ Examination and Enforcement Authority applies to ensure compliance with the very Consumer Protection and other legal requirements being discussed today associated with these kinds of loans. The rule provides a Plainlanguage Definition that a bank is a true lender which on the date of origination it is named as the lender of the Loan Agreement. The rule clarifies that as the true lender, the bank retains the compliance obligations associated with making the loan, even if the loan is later sold. Rather than a safe harbor as critics of the rule suggest, the rule ensures that the bank faces strict federal supervision for all the compliance considerations for making a loan, including, but not limited to fair lending, consumer compliance, Sound Underwriting and Money Laundering regulations. The rule negates rent a Charter Arrangements situations on behalf of third parties as was discussed previously and then walks away from any responsibility for the loan. In issuing the rule the agency was acutely sensitive to this issue and expressly stated that it would quote, hold banks accountable for all loans they make, including those made in the context of Marketplace Lending partnerships or other Loan Sale arrangements. Specifically, the occ emphasized its expectation that all banks will establish and maintain prudent Credit Underwriting practices and comply with applicable law even when they partner with third parties. If not, the occ will not hesitate to use its Enforcement Authority, consistent with its longstanding Policy And Practice and im sure as committee members know, the Occs Record here is positive, demonstrating significant Enforcement Actions that penalized banks when theyve allowed their charts to be rented out to abuse consumers. The true Lender Rule must be understood in context. True lender is the third component of a threecomponent legal regime. Component number one of the regime is the Interest Rate exportation. The supreme Court And Congresss 1980 enactment of the depository Institutions Deregulation and monetary Control Act allowed both national banks and state banks to export their Home States Interest Rates to customers in other states. This principle is not new, nor is it partisan. Marquette was argued by decided by Justice William Brennen on behalf of a unanimous supreme court. The monetary Control Act enjoyed Majority Support of both parties and was signed into law by president jimmy carter. The second component of the legal regime is the valid when made concept. That concept flows from the idea that banks have the ability to sell loans to third parties. This is good policy, because it allows banks to take the money generated by the Loan Sale and recycle that money into the next loan, thus increasing the total supply of credit. An economic study showed that when banks are not able to do this, the first people to suffer are low and moderate income americans. Court cases from around the country have held that the Interest Rate on a loan that is valid when made by a bank remains valid even after the loan is sold to a third party. The exception is the famous madden decision, and we know the effect of madden. In the two states subject to that decision, low to moderate income americans fell by 64 afterward and why . Because when Bank Lending is limited to the banks own Balance Sheet, the bank will first make loans to the safest and usually richest borrowers and when it runs out of lendable funds or when it reaches borrowers whose Market Rate of interest exceeds the legal rate, it will stop lending. Madden did not reduce the price of credit to those borrowers. It reduced the availability of credit to people who needed it most. Criticism of madden again is not a partisan issue. President obamas solicitor general advised the supreme court that the Madden Court of appeals erred in holding that state Usury Laws may validly prohibit a national banks assignee from assigning valid under the law of the state in which the national bank is located. Again, that is the Obama Administration Solicitor general speaking. Having said all this, the true Lender Rule does not alter States Authority to set their own banks or nonbank lenders or to define what true lender means for state banks, nor does it alter state authorities to license, regulate and enforce laws applicable to nonbank lenders and financial services providers, and i think the states should vigorously exercise those authorities regarding those State License companies. I would note that the very Payday Lenders and others that come in with criticism are State Licensed and if the state has serious concerns about them, they are, of course, free to revoke their licenses or take other actions. Senators, the issue is price controls. I would ask you to consider that price controls result in shortages. Thank you. Thank you, mr. Brooks. Dr. Kim harris youre recognized , for five minutes. Thanks for joining us. Thank you, Chairman Brown, ranking Member Toomey, members of the committee. Its a pleasure to be with you today. I request that my written testimony and a supporting document that i quote extensively in my testimony be entered into the record, as well. I will explain the economic benefits that arise for allowing financial institution of various kinds to partner with each other in providing lending services to their customers in the context of an integrated national market for loans. A massive amount of evidence has come to light showing advantages of an integrated national market for loans and permits diverse businesses with different comparative advantages to work together in the lending Supply Chain. Recently, a nonpartisan group of 47 leading scholars of banking working at americas greatest universities summarized this literature in an amicus brief which was filed in support of the Occs Defense of its valid when made rule and by extension its true Lender Rule. My testimony describes that consensus, which is remarkably clear and unequivocal. The true Lender Rule clarifies that a bank that originates a loan retains the Consumer Protection obligations related to making that loan, and whether or not it sells the loan to another party, some state authorities oppose the valid when made and true Lender Rules to preserve the ability of the state to enforce Usury Laws that limit Interest Rates on loans. If state challenges were upheld in the courts, that would wreak havoc on the national market for Loan Sales, but why does that matter to individual consumers . A central insight of the amicus brief is that the competitive abilities to originate loans, to hold loans or to perform other services related to loans in the Supply Chain differ across providers. Holding funds and skills in the loan Supply Chain and integrated competitive and innovative national market makes loans cheaper for borrowers. Quote from the brief. If the Usury Law in the loaners would be significantly disrupted, an institution in one state could legally make the loan, but institutionses in other states may not purchase it with the same pricing. Consequently, the integrated secondary market for Loan Sales would be reduced and fragmented across groups of states with similar Usury Laws. Therefore, to preserve a well functioning market for Loan Sales, the Occs Rule should be maintained, end quote. Lowincome, risky and small dollar borrowers would be especially harmed if the rule were rejected. Quote, the extension of Lending And Lowering of risk made possible by Loan Sales should lead to more financial inclusion and broader access to credit. Studies have shown that Loan Sales reduce the Interest Rates that borrowers pay on their loans and increase the likelihood that borrowers will receive a loan. These advantages should in theory be especially important for small and risky borrowers who are often excluded from receiving loans when credit is constrained. Moreover, many innovative new Fin Tech lenders rely on Loan Sales as a means of leveraging their origination capabilities, which can carry particular benefit for less wealthy or higher risk borrowers. Limits on the viability of the Loan Sales market would therefore have adverse effects on the underserved by limiting their ability to receive lowercost loans as well as receive funds through innovative financial inclusion intermediaries. But shouldnt we worry that allowing Loan Sales across state lines undermines the effectiveness of Usury Laws . Is that a bad thing . Going to again from the study. Quote, usury rates attempt to restrict any potential Market Power the banks can use to disadvantaged borrowers. However usury ceilings could also differentially curtail loans to riskier and lower quality borrowers, thus pushing them towards less regulated types of borrowing. Empirical research quite broadly supports the notion that the latter effect dominates, that riskierlooking borrowers who are often minorities or others with limited financial access are hurt when usury ceilings are binding and benefited when they are loosened or eliminated. I close with two of my own observations. A borrower could qualify for a loan at 8 but not be aware of that and a lender might trick him or her into agreeing to a much higher Interest Rate. This sort of trickery is possible when markets lack competition and when borrowers lack information about their own credit risk. As the appendix to my testimony shows the role of new Fin Tech entrants who should not be confused with Payday Lenders, in fact, theyre the competition for Payday Lenders, the appendix shows the rule of new Fin Tech entrants in strengthening competition and empowering borrowers with new sources of information are precisely the reasons that Fin Tech groups are making important [inaudible] to financial inclusion. Ill stop there. Thank you very much. Thank you for your testimony. I will begin the questions and then Senator Toomey, ill start with dr. Frederick douglas hanes. Youre testifying today as part of a broad coalition of faithbased institutions working to end predatory lending. Talk to me how these institutions, politically, certainly differ all across the political spectrum. Why are they united in this work to end predatory lending and oppose the true Lender Rule . Well, because of the fact that across all faith traditions, there is usury is condemned, economically exploiting those who are already vulnerable. Those practices are condemned, in both the Hebrew Bible as well as the greek new testament. Usury is condemned. Jesus overturned the money tables that may well be Fin Tech or Payday Loan stores of his day. The Hebrew Bible repeatedly warns against usury so this is something that we are joined together because morally, we all agree that usury is wrong. Morally we all agree that exploitation of the poor is something that god frowns upon. That is why again, though we may be ideologically and politically different, we all agree morally that usury damages any community. Thank you. How are the rules different than how the agency approached rent too schemes under approached rent a Bank Schemes under the Bush Administration . This is a 180 Degrees Change in policy. It isnt like Access Caucus Space in an Office Building that the Bank Interest excess Office Space in a building that the bank can just rent out. It shut down the schemes. The administration looked at the transactions, just as it has done for years, and that rule prioritized on a piece of paper, even if it was a sham. Do you think the Bush Era would have shut down this scheme . No, not what we saw in 2000, the one General Stein talked about and other states shut down. What we saw in those is all that was required on paperwork was a name on the loan, and that is what we saw in the early 2000s. Even though from the Consumer Perspective they might walk into the Payday Loan store, get the loan, make payments, dealt with collection attempts, and was sued because the Bank Name was on the document under this rule that wouldve been insufficient would have been sufficient and would not have been shut down. They would have been allowed. So these schemes would not have been shut down. Thank you. General stein, the occ claims the road does not limit the ability to regulate Payday Loans and other nonbank lenders. You testified to stay politics away your authority to shut down such schemes targeting residents in North Carolina. Can you explain why . The reason we succeeded in North Carolina in running the Payday Lenders out into 1004 and in 2004 and 2005 was because we brought the case to commissioner banks and they concluded the majority of them were with Payday Lenders. The Penny Lender Relationship with the bank was essentially paying them for use of their logo on the bank application form, on the loan application form. If the true Lender Rule as presented by the occ takes full effect, and not congress, the exact same relationship we successfully defeated and ran out of North Carolina, it would be challenging for us to win such a case in the future. This decision about what is in the interest of North Carolina consumers, it is for the people of North Carolina through their state elected representatives, their decision to make. We have made those decisions. I have heard people testifying about a concern over a shortage of credit. We want a shortage of high costs, illegal loans. That is a good thing. It is a decision we as a state have made. Thank you. Senator toomey. Thank you. Let me go to mr. Brooks. One of the principal virtues of the rule is that it creates a clear rule to provide certainty in advance about who is responsible for a loan when banks and Nonbanks Partner to make that loan. Can you tell us why that is important for market participants to have that regulatory certainty, and what would the effect be if this rule gets repealed and there is some certainty . Senator, i appreciate the question. The certainty that is important under the rule Lender Rule has to do with the true Interest Rate enforceability. If the bank is not sure or the markets are not sure whether the Interest Rate will be valid when the loan is sold into a Credit Card Securitization or personal loan securitization, the market will not invest in that, which means those loans go away. I cannot emphasize this too much, it is not the loans become cheaper if the loans go away. I think the comment that there are people who want those loans to go away is an interesting lens into how to think about it. The idea we should forbid people from having access to loans because they cannot be trusted to make a good decision for themselves, does that strike you as patronizing and condescending . I would hesitate to make characterizations of other people i respect. What about the idea . The idea is not consistent with the concept of a pluralisitc, capitalistic democracy. I took out loans that other people would look at as shocking. They allowed me to get my life on track, so i dont look on interest as a bad thing. If i need a personal loan to replace my roof or do one of the many things people use these loans for, it is not up to me to say that is a bad thing. It might be okay for the consumer to make that decision. Some have suggested the true Lender Rule creates a regime that revokes state Usury Laws and allows nonbank lenders not subject to regulatory oversight, so both of these things. As you mentioned in your comments, both federally and statechartered banks that had the legal authority, and it has not been controversial, to have to export Interest Rates. Does that rule have the effect of undermining state rights . What about this claimed that it creates a regulatory wasteland where these loans are not subject to regulation . Senator, there is a lot there, but first of all, the concept is not new. Justice brennan writing for a unanimous supreme court upheld the principle of rate exportation. President carter upheld that right for state banks as well. To be clear, that a rate of interest can be charge that is higher than the borrowers home State Rate has been the law of the land since 1978. There is nothing new about that and it is supported by both parties. In terms of the regulatory wasteland, there are two points. First of all, these predatory lenders are statelicensed entities. Let me repeat that. They are statelicense entities, and a state is free to yank the license of those companies, and it should if it thinks consumer abuses are going on. The point of the rule is to make clear that banks can leverage their Balance Sheet through Loan Sales to make more credit available to more people. If that is debatable, someone should debate it, but they should have their licenses yanked by the state who licenses them. Thanks. Professor, i think some have indicated they are concerned with the true Lender Rule, and if it were overturned, it would subject additional loans to State Price caps. In the view that price controls are good for consumers, is it your view that price controls are good for consumers and that is what we ought to seek . I think your mic is off. Is it on now . Yes. The evidence, which my statement shows, Usury Laws are bad for consumers. They limit Credit Availability for consumers, especially low income, high risk borrowers, so there is no question about that. That is not just my opinion. Also i want to point out that the opportunity that all of us have in our mind that we would like to see borrowers who can qualify for low interestrate loans not be tricked into high Interest Rate loans. That is a valid issue. And what i want to point out, i want everyone to take a few minutes to read what i wrote about what is going on now with financial inclusion and protecting consumers from these Syntax Bank Syntax Fintech Bank partnerships. It is exciting. It is impressive. It has absolutely nothing to do with Payday Lending, except it is not intrinsic to Payday Lending, and it is steering borrowers to other Interest Rates. That is what is at stake. We have a mischaracterization of the flexibile and innovative partnerships empowering consumers. I give many examples in my testimony. Since i wrote my testimony, some have come to me and said you left me out. I am doing this, too. So it is actually a broadbased and exciting movement, and i hope we dont in some misguided attempt to thwart something undermine this progress. Thank you, mr. Chairman. Senator toomey, senator, from rhode island for five minutes. Let me direct my question to Attorney General stein. There has been a discussion about the effects of Interest Rate caps and Usury Laws and the unintended consequences of restricting credit. In North Carolina, you have some real evidence of what happens when a law is imposed. And when it is taken off. Can you comment on that . I would be happy to. Thank you, senator reid. We are a bit of an experiment. We authorized it, then took away the authorization. There was a study done by unc after the law went away surveying low income households that universally needed credit, and the conclusion of the survey was the absence of storefront Payday Lending did not have a meaningful impact on availability of credit to households in need, because there were other options available to them. In fact, when they ask households what they thought, 90 of them said they thought Payday Lending was a bad thing, and of those households that had taken out Payday Loans in the past, more than two to one ratio they said these were bad things, not good things, incredibly easy to get into because the Marketing And Need but incredibly to get out of. And so, yes, there are alternatives to Credit Alternative Credit options to people that are not exploitive, and that is much better. Thank you very much. We have been talking about the repayment of these loans with high interest, but we working with the chairman and others have passed the military Lending Act which has a 36 cap on loans. The department of defense pointed out there where associated costs to the Payday Lending, people literally lost their jobs because they became insolvent and were discharged, and the Discharge Cost additional money, so could you talk about some of the nonmonetary costs incurred because of predatory loans . Thank you, senator. I would be happy to. So, there are highcost loans associated with longlasting financial consequences that include bankruptcy, insufficient fund fees, other Bank Penalty fees, and often being shut out of the banking, financial mainstream because of account closures. It is harder to get Car Title loans. They are often having their cars repossessed and can get to work and are at risk of losing their jobs. The debt comes with health consequences due to being in debt, and small business borrowers deal with harassment, bank fees, bankruptcies, loss of business, and often loss of personal homes. Those are just some of the additional harms. I will add the attack on the mental health of those who find themselves stressed out because they cannot pay off the loans and their economic situation not only spirals downward and they find themselves stressed, but there are so many other ramifications it is almost a Domino Effect of consequences, so when you move from the mental health, not only to mental health, but then the families, i have literally seen families fall apart because they could not handle the stress of having been put in the Debt Trap they found themselves in. So, mental health as well as families falling apart are just two examples of the cascading effects of these predators. Thank you. I am not aware of my time, mr. Chairman. I have one other question. Proceed, senator. Go ahead. You said in your written testimony that predatory lending is different than responsible lending. High Cost Lending turns the incentives on whether it succeeds or fails. Can you explain that . With reasonably priced loans, lenders only succeed when borrowers can repay the principal, of the highcost loans, this is not the case. With the high cost, Installment Loan like many of the rental Bank Schemes, the high Interest Rate slows down the payment of principal so much that the borrower can take months or years without making a dent in the principal, but the borrower has to pay so much in Interest Loan that the lender has reached a profit without the principal balance decreasing at all. There are examples, in maryland, a borrower took out a 2000 Installment Loan with opportunity financial through a rent a Bank Scheme, that the district of columbia Attorney General was suing for, after more than a year of paying on that loan, the borrower paid 3600 in the principal of the 2000 loan had not decreased at all. This is an example of how truly unaffordable loans can get stuck in the Debt Trap and what loans do for borrowers if theyre paid off. Thank you. Senator from North Carolina is recognized for five minutes. Thank you. A speckle will a special welcome to General Stein. It is good to see you. We spent time in the legislature together. I first have to go back to when i was 13 years old. I knew what a 90day Note was. That is what my dad got when we had a personal Banking Relationship and some of the larger banks or regional banks were willing to take a risk on somebody who had no guaranteed income stream. I did Construction Work for him. He would get a project from the insurance damage, go to the bank, get a 90 Day Note with the understanding that you could get it done in six days and pay it off. Nowadays, you virtually have no personal Banking Relationship with the large banks, particularly someone like my father who had six people to feed, and i would argue a relatively high risk profile. Fortunately he was able to pay it off, but it seems like that it seems like those days are gone for most of the large banking institutions. When i was in the legislature, invariably when we would have a discussion about shutting down some of these high risk loans, the caucus that came to me first was the africanamerican communities, that the lower Interest Loans would not be available to them so they were more likely to go off the books and get funds from people who were far more predatory because they escaped any regulatory oversight. Do you agree with that opinion that if not careful with the policies moving forward . I will kick that off. Thank you for the question. I would say the point of the work the occ did over the last year, starting with small dollar lending guidance, culminating with true lender, was getting more banks involved so we could rely less on nonbanks. I am puzzled why we talk about Payday Lending, when the occ is ever likely to endorse such an arrangement. What we are talking about is the personal loan market, where finn techs have a larger share, and that is about people like your dad, 5000 to 15,000 balance loans that arent refinanced a hundred times. Were talking about Installment Loans with up to a twoyear repayment, 50 to 20 , and it is all about that. Banks stopped making those loans. How can we supervise entities in a way that holds somebody accountable . That is the point. I would like you to add to our talk. I think Senator Toomey spoke about it. We want to get rid of these highInterest Loans. The inference you could draw for that, somebody watching this hearing, there will be a plethora of low Interest Loans. If you could respond to my first question, then we will get back to you. I want to answer both questions. Yes, the literature has shown that people who suffer are lower income, small dollar, and higher risk borrowers. Absolutely. That is the evidence very clearly. What is exciting is what we are seeing with these fintech providers partnering with banks for these loans, they are helping to bring more credit at lower Interest Rates, and they are not doing that by providing capital, but also providing education, different Language Consultation services. They are making sure people are not tricked. This is really helpful. Characterizing this as Payday Lending is completely false. This is not about Payday Lending. The occ is not involved in Payday Lending or sanctioning it. This is about broadening the base of access for consumers, and that is where the discussion should be. I hope people will read my appendix which gives more of a sense of the richness of what is going on right now. I thank you both for your responses. I may have a couple of questions for the record. There is no question that there are predatory lenders, and that is why i supported financial literacy initiatives to make everybody aware of the lowest Cost Option for financing. Count me in for doing that. By removing this for the dads of today trying to get that shortterm loan to put food on the table for six kids, count me out of that. Thank you, mr. Chair. Thank you. Senator warren of massachusetts is recognized for five minutes. Thank you, mr. Chairman. So in our legal system, they set Interest Rate caps, determining what rates constitute usury. If i went to someone in massachusetts, the Interest Rate would be capped at the massachusetts maximum, which is 20 . The idea of protecting borrowers from usury dates back. In 1979, the supreme court took that away, opening a loophole a to let banks escape centuries of Usury Laws. Over time, banks figured out they could open that loophole wider through the socalled rent a Bank Scheme. Under this arrangement, a nonbank lender like an online lender or Payday Loan company that would usually be subject to Usury Laws, find a bank to originate a loan on its behalf, funneled the funding through the bank, and avoid state Interest Rate caps. That means the Interest Rate caps like 20 , they can go to 35 or 400 or 1000 . Last year, the occ issued a rule clarifying who is entitled to the usury exemption in cases like these. Mr. Brooks you were acting , comptroller was the true Lender Rule was finalized. The rule acknowledges that rentaBank Schemes have no place in the federal financial system. Is that your personal view as well . Absolutely. Good. It is mine, too. Lets look at what the rule you push through actually allows. Under the rule, if a Payday Lender arranges a loan for a consumer, it is subject to state Usury Laws, but under the occs new rule if that same Payday Lender arranges for a bank to originate the loan, and then the Payday Lender immediately buys the loan back from the bank to collect the payments, the bank would be considered the true lender, so long as it was named in the Loan Agreement, and that loan would be exempt from state Usury Laws under this rule from the occ, is that correct . If the bank is named as the lender, or if the bank funds the loan right, the bank is , expected to treat that as though it is its own loan for underwriting, Consumer Protection, and other purposes. Senator warren because banks have an exemption from State Usury caps, there would be no limit what the Payday Lender could charge the borrower if it just funnels its loan through a bank, so could it be 20 , 35 , 400 , or 1000 . I disagree with the premise. In the example, its not the Payday Lender is charging the rate, the bank is charging the rate. Which the bank has to assess the ability to repay and everything else. It is not the Payday Lender is originating. It is what the bank is originating. I see what youre trying to do with the language. I understand the Payday Lender has gotten the bank to put its name on the paper, but my question is that if it is the Payday Lender who finds the customer, has the whole idea to put this together but gets the bank to put the name on the paper, will that loan be subject to Usury Laws . It is a pretty straightforward question. I think it is the preamble to the question that is not straightforward, the preamble assumes the bank would originate a Payday Loan, the likelihood of refinance, the likely inability to repay, banks are not allowed to do that. Let me stop you. I want to be clear. The new rule in place says lets look at the paperwork. If the Banks Name is on the paper, that is what forms the control. I realize you want to talk about the additional other places that there are rules and regulations governing the behavior of the bank, so the occ would let Payday Lenders get an exemption from Usury Laws but the occ will continue to take Enforcement Actions when the bank originates a loan if it does not consider the Borrowers Ability to pay. In other words, you are saying the occ will be tough on banks, is that right . There was a lot you said i disagree with, but yes, the Occs History being tough with banks is well document. Senator warren if the chair will indulge me for a minute, i do know the Occ History on how tough you have been, but in massachusetts, in 2018, one bank rented itself out to a nonbank company to lend to massachusetts small business at 92 interest, which is well above our Commonwealth Usury Cap of 20 . The company arranged alone, that arrange the loan, the terms, collected the payments, but the name Access Bank was on the loan document. Let me ask you, mr. Brooks, how many Enforcement Actions has the occ taken against Access Bank in recent years . It is a great question. We did not have the true Lender Rule in 2018. How many actions did you take . All of the rest of the rules were still in place. How many . It is a straightforward question. One bank charging 92 interest, how many Enforcement Actions did you take . There is a word you do not want to have to say here. I am, i am, i am. Senator warren zero. None. The way the rules were made the way the Banking Industry wanted and put the interests of the wealthy and powerful ahead of families and small businesses. We will have a chance to vote on this in the congressional Review Act resolution to nullify the true Lender Rule, and i hope we pass that and undo the damage the trumpappointed regulators have done. Thank you, mr. Chairman. The senator is recognized for five minutes. Thank you, mr. Chairman, and thank you to the panel for the conversation today. Mr. Brooks, let me ask you this, some nonbank lenders have openly acknowledged that they are funneling their loans through banks to evade state Interest Rate caps, isnt that true . If there is a nonbank lender that said any of those words, i would be surprised. They have. As a former regulator, should that not concern you . I am not aware of anyone who has publicly said that. I understand. I am telling you they have. I appreciate that. I am making you aware of it. I assume you will be concerned about it. Isnt it true that the fdic has not proposed a similar rule . Thats not quite right. There are three laws that all work together. There is the valid when made rule which is what this whole discussion is actually about. Its not about Payday Lenders. The ftse did adopt that rule. Let me ask you this. Because you are going to talk this to death. I appreciate that. As former Attorney General, i have to be concerned about those individuals who are out there who are using it to skirt around State Laws. You know it and i know it. Its happening. I appreciate where you are coming from. You were the controller when this law was passed. Let me ask the Attorney General. General stein, based on this new rule that the Bank Name on the paper is in control, the example that Senator Warren just gave, how does that affect your ability to challenge a Payday Lender and bank who is skirting your States Interestrate Cap . Would it make it more difficult to challenge that arrangement and protect your constituents in your state . Absolutely. This is a perfect example of the occ trying to preempt the States Ability to protect their people from unlawful highcost harmful loan products. Ask yourself, these thirdparty lenders, are they doing these relationships with national banks in states that dont have interestrate caps . No. They will only enter into these relationships with national banks because they have to take a light to their feet to pay the banks for use of the logo on their application form. They only will do that in states like North Carolina, massachusetts, pennsylvania where the state legislators have made the determination that they want to protect their people. In the 2019 bank survey, 5. 7 percent of houses had taken out Payday Loans. Thats the highest in the nation. The typical rate in nevada is 652 interest. Would the occ new rule undercut the ability to track those loans to consumers or even challenge the states from taking future actions to limit predatory lending . Thank you for that question. This will impede Nevadas Ability to track loans and also to set interestrate limits. One thing i want to clear up around confusion that is happening around we are talking about Payday Loans. Its because Payday Lenders that are engaging in the schemes right now online and in stores. We have been finding daily we have been finding daily Payday Lenders and other lenders engaging in predatory instore behavior. Its using this scheme again in states like ohio, arizona, virginia, nebraska, and california. States that have capped rates on payday and other loans and instore and online. I know my time is up. Thank you ranking member for this great conversation today. Thank you. Senator Van Hollen is recognized for five minutes. Thank you for holding this important hearing. Thank you to all the witnesses. As we have heard, this new true Lender Rule has opened up the flood banks to predatory lending and i hope congress will muster the votes to overturn it. In my state of maryland, we have laws in place to try to prevent predatory lending so they cant take advantage of consumers. Under our State Law, maximum Interest Rate on 1000 loan is 33 . On 2000 loan, it is 24 . On greater than 2000, it is 24 . And yet through these schemes, predatory lenders can evade these caps, launder a high Interest Rate loans. We are talking about rates of 179 or higher by having a Rubberstamp Partnership with these banks as has been described. You started to talk about this in response to another question. From your research, have you seen this resurgence of schemes . If so, how are they the same or different than what we saw in the early 2000 when the Occ And State attorneys general shut them down . Some claim that we have not seen these problems. Thank you for the question. Yes, we are seeing reemergence of the schemes. There have been banks over the past few years with a of schemes, but we are seeing more and more of the schemes emerging thanks to the Occ And Fbi see recent action over the past couple of years. They are fundamentally the same as in the 2000s. Now, banks handle transactions. In order to try to get around State Law. Shortly after origination, the nonlender purchases the contract. Todays schemes might be dressed up a little fancier but in older schemes, they have the same rentabank evasion. They may not be as predatory, but they are 18 month loans at 5,000 offered instore and online and they are growing. There are also pointofsale loans, Car Title loans that are in 45 states but the district of columbia are not legal right now. Thank you, to follow up on that and thank you for bringing legal actions you are on grounds of preemption this rule preempts State Law and violates the criteria that need to be applied for any kind of preemption from your perspective and the perspective of the states, what has been the experience that the occs preempting Consumer Protection laws in the past . There are parallels between what is happening now and the early 2000 that contributed to the meltdown. Thank you, senator. This is not the occ first gambit at trying to keep states from looking out for the borrowers. The first state to pass a predatory Lending Lot back in 1998, than others followed. Prohibition on flipping loans to charge unnecessary fees. Negative amortization. All of these things that led to a surge in dangerous highcost subprime loans throughout the early 2000s. We fought back against the preemptive moves, but the damage was done and we all lived through the painful great recession that was sparked by the meltdown of subprime organs subprime mortgage lending. Thats why you passed the dodd frank act and thats what you put restrictions on the Occs Ability to preempt state because you saw the negative experience. The occ is flouting the dictates of congress by failing to engage in the requirement you imposed on them and that is why we urge you all to exercise your authority. Thank you and i hope we will. Senator brown and i have filed exactly that proposal for congress to act to overturn it. Thank you for all of your testimony. Thank you. Senator smith, thank you for allowing Senator Warnock to go next. Senator warnock from georgia is recognized for five minutes. Thank you very much, mr. Chairman. As chair of the subcommittee on financial institutions and Consumer Protection, i am very concerned about this issue. And i want to make it very clear that i will do everything i can to protect consumers. Especially the most marginalized. Vulnerable people are the ones who are targeted by these loans. This socalled true Lender Rule, what a misnomer. There is nothing true about it and it provides an avenue predatory lenders to partner with banks to pedal harmful loans with triple digit Interest Rates. Triple digits. In states that have reasonable caps like North Carolina on interestrate to protect consumers. Today, nearly 16,000 Payday And Auto loan operate nationwide. I have seen this up close and firsthand as a pastor. Pastor haynes, let me begin with you. We worked on these issues for years. I know of your Involvement And Advocacy and we often talk about financial predators to take it vantage of the poor. Take advantage of the poor. In your testimony, you shared some of these experiences of many who attend your church, could you briefly talk about how these arrangements are affecting both older and younger generations at your church and the surrounding community . What do you think of the longterm economic consequences for the consumer . Thank you for the question. As you know, usery is unbiblical and immoral. Because of the damage it does to those who are already economically vulnerable. In the area where i am blessed to pastor, sadly within three mile radius, you have in excess of 20 Payday Loan and Car Title loan stores. At the same time, we have seen banks vacate that area so the payday and Car Title loan stores become the options that persons have in order to make up for being in an underserved area. Of course, they find themselves in a Debt Trap and the Debt Trap does so much damage to the community. It does damage to the family. The bottom line is, we are talking about those who are already vulnerable who live in a community that is underserved and suffers from being disinvested. When you combine all of that, earlier persons were talking about taking away choices from consumers. Yet when the options are predatory, you set them up to make choices that will have consequences that again will do damage to the family and further damage to a community that is already underserved. Pastor warnock, you can appreciate this. I dont want jesus to say to america in the judgment, i was hungry and you gave me a Payday Loan. Thank you so much. Its an important point that you make, this assumption that we are providing options when the reality is people are being get out ghettoized to these inferior loan products. In your testimony, you noted that these Products Target communities of color. In addition to passing senate joint resolution to overturn this bad rule, what other actions should ever Federal Regulators take to close the predatory loophole and lessen the impact on vulnerable communities . Thank you for the question. Yes, there are a number of actions that can be taken at the federal level. Whether it the regulators or you all and congress, one of the key policies that as i mentioned in my testimony while states and the district of columbia have caps on Payday Loans and they represent over 150 million people in the country, the rest of the country is at risk to the Payday Loans. Something that congress can do and we support is a federal Interest Rate cap of early 6 . 36 . We have to support Senate Resolution 15. Thank you so much for your testimony, thank you mr. Chairman. Senator smith from minnesota is recognized for five minutes. Thank you. Every year, and minnesota and all across the country people are taken advantage of by financial institutions, companies, individuals acting in bad faith. We know as researchers and advocates have long criticized Payday Lenders for praying on consumers. We know that too often, the victims are from low income communities and from communities of color. People are risk off and it is immoral and disgraceful. In minnesota, a 2016 analysis showed that black minnesotans are twice as likely as those as a whole to live within 2. 5 miles of a Payday Loan store. I would like to start with the Attorney General. You joined a group of other attorneys general including our outstanding Attorney General from minnesota in filing a lawsuit against the oc to challenge the true Lender Rule. Can you explain to us whether or not you think this true Lender Rule makes it easier for Payday Lenders to rip off consumers . Thats how it seems to me, it makes it easier for them to do this. Yes, absolutely. The effect of this rule to be more accurate is that Payday Lenders in states where it is illegal for them to operate will pay a fee to. Show full text i headed the Consumer Protection division 2001 to 2008. The law over Payday Lending went into effect in 2001. It took us five years of vigorous enforcement State Law is part of what your charter is, your job as Attorney General. I headed the Consumer Protection division from 2001 to 2008. The law over Payday Lending went into effect in 2001. It took us five years of vigorous enforcement State Law until we succeeded in chasing out the last storefronts of Payday Lenders in North Carolina. It was hard, but we succeeded. This new rule will put in jeopardy all of that hard work. What im struggling to understand is why would we do this . Why would anybody think that it is a good idea to make it easier to rip people off like this . What is the justification . I agree. What drives Payday Lending is greed. These people know they can make money. The entire Business Model of Payday Lending is not repaying the loan. The entire model is dependent on a percentage of those borrowers never being able to repay the principal and being on the hook for the ongoing fees for weeks and weeks and weeks at a time. If everybody repay the loan and they were done after two weeks, the business would not exist. Is entirely dependent on those who are desperate and and a hard way. It seems to me that as policymakers we should be making it harder and not easier for Payday Lenders to prey on people who are trapped in the cycle of debt and they need to see that these predatory practices dont just happen randomly on the community. They specifically are targeting black and brown folks. I would love and my last few minutes, pastor i appreciate your testimony. I wonder as you think about your parishioners, how would you connect this Bank Scheme with our history of other policies and practices that have discriminated against like and brown people . Specifically, we have banks that make it harder for black and brown people to borrow money. At the same time, we make it easier for predatory lenders ike this to come into communities and trap people. Thank you. I will simply say that again, we have a history of redlining black and brown communities. That history now continues and in the past, neighborhoods were targeted or zip codes were targeted for noninvestment. Nonloan, nonbank opportunities. Now, the target is to exploit those already vulnerable. I think it would be just another concept to the occ instead of protecting predators, lets see to it the banks serve all consumers and all consumers in a way that is just fair and oral. Fair and moral. I agree and i think this should be the work of this committee. It is not an accident of history that this is happening in the black and brown communities. This is by design and we need to break the pattern. Its what i look forward to working on. Thank you for your questions. The hearing is drawing to a close. Todays testimony makes it obvious why we need to overturn the rule that enables a new group of Payday Lenders to resurrect the same old rentaBank Scheme. How do we know this is happening . Look at where these lenders are using that strategy. They are lending directly in states with no rate caps, but they are using the strategy where there are limits as well. Conservative states, states that are known to most of us as republican. States like georgia, north dakota, south carolina. We heard Talk Today about how Payday Lenders. But Debt Traps are not reasonable options. We heard about access to credit and how overturning this rule might decrease that access. We want to decrease loans at Interest Rates so high the people cannot repay them. That is the whole point of our resolution. Listen to the testimony we had yesterday. We listened to five workers talk about their lives. They are diverse geographically and racially. They talked about the struggles and part of that is their struggles with debt. Lowwage workers if you believe in the dignity of work, you should be able to get ahead. One worker said a woman from southern West Virginia said they call me the working poor, but she said working and poor should not be in the same sentence. If we are concerned too many People Cant afford Car Repair or medical Bill Isnt to trap them in a cycle of debt, it is to raise their wages. Thank you for testifying and for senators who wish to submit questions for the record, these questions are due one week from today. Please abide by that. For witnesses, we ask you within 45 days to respond to any of these questions. Thank you again all of you for being here. The committee is adjourn