Eight states and the District of Columbia are suing the national banking regulator over a rule change that has just taken effect.
In a January 5 lawsuit, the New York attorney general is leading the charge against the Office of the Currency Controller and the current Interim Controller Brian Brooks.
In October, the OCC established its “True Lender” rule, which went into effect in late December. The rule states that a loan that includes a national bank as a creditor can therefore rely on the national guidance of the OCC instead of the guidance of individual states. The controversy here is that many states have particularly strong anti-usury provisions, which limit interest rates in the hope of avoiding predatory lending. Today’s complaint alleges that the OCC did not take the concerns seriously:
“Although the OCC speaks out to condemn predatory lending, it gives its full endorsement to lending relationships based on circumvention of usury laws designed to protect consumers.
The OCC, for its part, stated in announcing the rule that:
“Banks’ lending relationships with third parties can facilitate access to affordable credit. However, increasing legal uncertainty regarding these relationships can discourage banks and third parties from partnering, limiting competition and curbing the innovation that results from such partnerships. This can ultimately restrict access to affordable credit. “
In their complaint today, state regulators claim that the OCC has exceeded its authority by overriding – or anticipating – state law. They say the regulator also violated the Administrative Procedure Law by taking his rule out the door without taking comments about his proposed rule seriously. In addition, regulators ask the court to “declare that the OCC has violated the APA because its True Lender Rule is arbitrary, capricious, an abuse of discretion or otherwise not in accordance with the law.”
The OCC declined Cointelegraph’s request to comment on the dispute.
In late December, an association of state banking regulators filed similar complaints against the OCC for its work on chartering a non-depositary blockchain lending platform as a national bank. These regulators assured Cointelegraph that the OCC’s preemption principle was the central legal issue.
Meanwhile, last night, the OCC sent out a new interpretive letter that would allow national banks to manage nodes for stable currency networks. Under these and similar rules, Brooks has become a folk hero among the cryptographic community since taking over as Interim Controller in May.