Eight states and the District of Columbia are suing the national bank regulator over a rule change that just came into effect.

Per a Jan. 5 filing, New York’s attorney general is leading the charge against the Office of the Comptroller of the Currency and current Acting Comptroller Brian Brooks. 

Back in October, the OCC laid out its “True Lender” rule, which took effect at the end of December. The rule dictates that a loan that includes a national bank as a lender can therefore rely on the OCC’s national guidance rather than that of individual states. The controversy here is that many states have especially strong anti-usury provisions, which cap interest rates in the hope of preventing predatory lending. Today’s complaint alleges that the OCC has not taken the concerns seriously: 

“While the OCC pays lip service to condemning predatory lending, it gives its wholesale endorsement to lending relationships predicated on evasion of usury laws designed to protect consumers.”

The OCC, for its part, said upon announcing the rule that: 

“Banks’ lending relationships with third parties can facilitate access to affordable credit. However, increasing legal uncertainty regarding such relationships may discourage banks and third parties from partnering, limit competition, and chill the innovation that results from these partnerships. This may ultimately restrict access to affordable credit.”

In their complaint from today, the state regulators claim that the OCC overstepped its authority by overriding — or preempting— state law. They say the regulator also violated the Administrative Procedure Act in rushing its rule out the door without taking comments on its rule proposal seriously. Moreover, the regulators ask the court to “declare that the OCC violated the APA because its True Lender Rule is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”

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The OCC declined Cointelegraph’s request for comment on the litigation.

At the end of December, an association of state banking regulators filed similar complaints against the OCC for its work to charter a non-depository blockchain lending platform as a national bank. Those regulators assured Cointelegraph that it was the principle of the OCC’s preemption that was the core legal issue. 

Meanwhile, just last night, the OCC sent out a new interpretive letter that would allow national banks to run nodes for stablecoin networks. For this and similar rulemakings, Brooks has become a folk hero among the crypto community since taking over as Acting Comptroller in May.

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States sue the OCC and Brian Brooks for overriding their controls on predatory lending

by Cameryn Gollakner
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