The bulletin issued this week by the OCC encouraging the banks it supervises “to offer responsible short-term, small-dollar installment loans” quickly met with mixed reviews from consumer advocates.
The Pew Charitable Trusts issued a press release in which it praised the OCC’s action for “remov[ing] much of the regulatory uncertainty that has prevented [banks] from entering the market [for small installment loans].” The press release quotes the director of Pew’s consumer finance project who called the OCC bulletin “a welcome step that should help pave the way for banks to offer safe, affordable small-dollar installment loans to the millions of Americans that have been turning to high-cost nonbank lenders.”
Other consumer advocates took a more critical view of the OCC bulletin. The Center for Responsible Lending’s senior policy counsel is reported to have raised the concern that “in a broader deregulatory environment, banks may be given more latitude to make high-cost loans than they’ve been given in the past, and that would have disastrous consequences.” She also reportedly noted the absence of a federal usury ceiling and suggested that the policies and practices for small dollar loans set forth in the OCC bulletin would not allow a bank to charge more than a 36% annual percentage rate on such loans.
Christopher Peterson, a senior fellow at the Consumer Federation of America and a law professor at the University of Utah, took an even harsher view of the OCC bulletin. Professor Peterson tweeted that he “[doesn’t] support this guidance” and that “[t]he OCC is replacing the 2013 policy with a new, weaker guidance that will tempt banks back into the subprime small dollar lending.” (The “2013 policy” referred to by Professor Peterson is the OCC’s rescinded guidance on deposit advance products).
Professor Peterson also criticized the OCC for not setting an “all-in usury limit,” commenting that the absence of such a limit “means many banks will be tempted to impose crushing rates and fees on borrowers.” Perhaps because he recognizes that the OCC cannot set a usury limit (because that limit is set forth in Section 85 of the National Bank Act), Professor Peterson called upon Congress to “step up with [a] national usury limit.” (Professor Peterson’s tweets can be viewed by clicking on the link below.)
