WASHINGTON — While Congress is poised to unwind an Office of the Comptroller of the Currency rule enabling loan sales to fintech firms, the agency's interim leader signaled that a separate companion rule is safe for the time being.
Democrats in the Senate voted last month to nullify the "true lender" rule under the Congressional Review Act. It designates a bank as the true lender in a sale to a nonbank — preserving the bank's authority to export interest rates — but critics said it allows fintech firms to engage in rent-a-bank schemes. The House is expected to block the rule as well.
Meanwhile, Congress missed the legislative window to block an earlier OCC rule written in the Trump era that similarly reinforced a legal principle that a bank loan is "valid when made." On Wednesday, Michael Hsu, appointed by the Biden administration as acting comptroller, suggested that the agency has no plans to unwind it either.
"That’s not under review,” Hsu said on a call with reporters, referring to the valid-when-made rule.
Hsu touched on a range of topics, though he stressed a desire “not to get too far in front of” ongoing reviews by OCC staff of actions taken under the Trump administration.
Both the true-lender and valid-when-made rules were intended to address legal ambiguities in the secondary lending market following the 2015 court decision in Madden v. Midland Funding.
Hsu also discussed pilot programs being undertaken by some of the nation’s largest banks to offer credit cards to Americans without credit scores — an offshoot of the agency’s Roundtable for Economic Access and Change, otherwise known as Project REACh.
Hsu said that while the pilots remain in early development, one issue that had already emerged was the question of how banks would be allowed to handle and use customers’ alternative data.
“Data privacy has been flagged as something that's going to have to get worked out,” Hsu said. “Other things have been flagged as well, but that's one of them.”
