On Sept. 3, The Pew Charitable Trusts submitted a letter in response to a request from the Office of the Comptroller of the Currency (OCC) for comment regarding its efforts to determine the circumstances under which a national bank or federal savings association should be considered the “true lender” in the context of a lending partnership between a bank and a third party.
In its letter, Pew drew on its extensive research on payday and other small-dollar loans to highlight stark contrasts between two types of partnerships among banks and third-party financial providers. The first type enables banks to offer safe, small installment loans, but the other permits payday or other nonbank lenders to exploit banks’ charters to originate high-cost loans that would otherwise violate state usury laws, putting consumers at extreme risk. Pew argued that third-party lending relationships can pose problems for consumers and the banking system that the OCC’s overly broad proposed rule could unnecessarily exacerbate.