New York Attorney General Letitia James' latest suit against the Trump administration would stop the federal government from preempting interest rate caps for lenders.
New York is one of 43 states that has imposed a rate cap meant to protect consumers and businesses from predatory lenders and debt traps. Federally chartered banks are excluded from this cap.
However, the AG interpreted that a recent ruling by the Office of the Comptroller of the Currency would extend the exemption to non-banks. The ruling was supposed to address legal confusion about permissible interest when a bank transfers a loan to a third party.
“As our state and nation continue to suffer the devastating effects of COVID-19, with millions of Americans still unemployed and struggling to make ends meet, it is reprehensible that the Trump administration has chosen to protect big banks’ profits rather than vulnerable consumers’ wallets,” James said. “All this rule does is make it easier for bad actors to charge New Yorkers triple-digit interest rates on loans and chart a path to more easily take advantage of consumers, which is why we are taking action.”
In the suit, the AG's office alleged the new rule would facilitate evasion of the law through "rent-a-bank" schemes. Essentially, a federally chartered bank would serve as a pass-through for loans issued by a third party.