On June 30, 2021, President Biden signed S. J. Res. 15, which had been passed by the U.S. Senate and House of Representatives, pursuant to the Congressional Review Act (the “CRA”), to nullify the Trump Administration’s “True Lender” final rule (the “True Lender Rule”). Under the CRA, the US Congress has a limited period of time for each chamber to pass resolutions to overturn an agency regulation. The CRA then forbids the agency that promulgated the regulation from adopting a substantially similar rule in the future unless the new rule is specifically authorized by a law enacted after the date of the original rule’s disapproval.
The True Lender Rule had been published by the Office of the Comptroller of the Currency (the “OCC”), an agency of the US Department of the Treasury, on October 30, 2020 and was effective December 29, 2020. It provided that a national bank or federal savings association (jointly, “national banks”) is deemed to make a loan when that national bank, as of the date of origination, either is named as the lender in the relevant loan agreement or funds the loan.
While loans normally must comply with applicable state usury laws, under federal banking law, the OCC has the ability to preempt state usury laws, and allow a national bank to “export” the interest rate from the state in which it is located. A nonbank generally then could purchase such a loan from the national bank and thereby become the owner of a usury-exempt loan, avoiding the applicability of state usury rates. Please see our May 6 blog post for more background on the True Lender Rule and the consequences of its then-proposed nullification.