House panel to discuss 'rent-a-bank' concerns in two February hearings

WASHINGTON — The House Financial Services Committee will hold two hearings next month on how regulatory policy should govern loans sold across state lines.

The Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. proposed steps in November for banks to be able to work around a 2015 court ruling that had restricted their ability to sell off loans. In the 2nd U.S. Circuit Court of Appeals' decision in Madden v. Midland Funding, the court ruled that a usury law in the buyer's state can apply.

The agencies proposed to clarify that when a national bank sells a loan, the same interest rate can survive to both ends of the transaction. But consumer advocates said that approach would sanction so-called rent-a-bank schemes by unregulated nonbanks in order to skirt borrower protections.

The House committee will likely delve deeper into those concerns in a two-part hearing on Feb. 5 and Feb. 26, "Rent-A-Bank Schemes and New Debt Traps: Assessing Efforts to Evade State Consumer Protections and Interest Rate Caps."

The full committee will also hold hearings in February to review monetary policy and the state of the economy, as well as a semiannual review of the Consumer Financial Protection Bureau.

Amid “astroturfing” concerns, which refers to a coordinated campaign of template-designed comments that imply grassroots support for a given policy, the subcommittee on oversight and investigations will hold a hearing Feb. 6, “Fake It Till They Make It: How Bad Actors Use Astroturfing to Manipulate Regulators, Disenfranchise Consumers and Subvert the Rulemaking Process.”

In letters to the heads of the OCC and the FDIC earlier this month, Chair Maxine Waters, D-Calif., cited reports suggesting that the agencies may have accepted “fraudulent comments” in the past.

The subcommittee on diversity and inclusion will also meet Feb. 12 to review diversity and inclusion at the nation’s largest banks, and the task force on artificial intelligence will hold a hearing the same day to examine efforts to limit algorithmic bias in financial services.