Democrats playing on the “anti-racism” wave spreading across America held a hearing Wednesday during which Sens. Chris Van Hollen (D-MD) and Sherrod Brown (D-OH) pushed legislation seeking to repeal a Trump-era rule they call “Rent-A-Bank.”
The Trump administration rule was actually called the True Lender Rule and adopted by the Office of the Comptroller of the Currency (OCC) on October 30, 2020. In the background information posted to the Federal Register, the final rule specifically states that it considered concerns from critics (mostly Democrats) and addressed them:
The OCC understands that there is concern that its rulemaking facilitates inappropriate `rent-a-charter’ lending schemes—arrangements in which a bank receives a fee to `rent’ its charter and unique legal status to a third party. These schemes are designed to enable the third party to evade state and local laws, including some state consumer protection laws, and to allow the bank to disclaim any compliance responsibility for the loans. These arrangements have absolutely no place in the federal banking system and are addressed by this rulemaking, which holds banks accountable for all loans they make, including those made in the context of marketplace lending partnerships or other loan sale arrangements.
Democrats and their media supporters have continued to attack the rule, claiming the rule hurts American consumers. Van Hollen claimed the “Trump Administration ripped consumer protections to shreds, leaving Americans vulnerable to unscrupulous predatory lenders who charge outrageous interest rates.”
Rep. Jesus “Chuy” Garcia (D-IL) claims this was part of a scheme where “Predatory loans trap working families into cycles of debt they can’t pay off,” with the True Lender Rule allowing “get around state laws that protect consumers.”
Those most hurt by such predatory loans, Democrats say, are minorities, yet their proposal to fix the problem, like so many other Democrat initiatives claiming to help minorities, will end up hurting the very group they claim to want to help. The borrowers who rely on the credit extended through the lender-bank partnerships like the ones in Van Hollen and Brown’s bill – the ones they want to end – benefit minority borrowers the most because they otherwise wouldn’t have access to credit due to the fact that banks are less likely to lend to minorities. The lenders partnered under the Trump-era rule, however, are more likely to lend to minorities.
In August 2020, CNBC published an article that claimed black applicants are much more likely than white applicants to be rejected by mortgage and mortgage refinancing lenders.
“[L]enders deny mortgages for Black applicants at a rate 80% higher than that of White applicants, according to 2020 data from the Home Mortgage Disclosure Act,” CNBC reported. “For refinances specifically, Black borrowers are denied mortgage refinance loans, on average, 30.22% of the time, far higher than the overall denial rate of 17.07%, according to an analysis of the HMDA data by LendingTree, an online mortgage marketplace.”
Of course, race isn’t the most likely factor in the mortgage denials, as CNBC also reported minority consumers “overall have lower incomes and lower credit scores than White consumers,” but that is not always the case.