Just Economy Conference – May 6, 2021
The Trump-appointed leadership of the Office of the Comptroller of the Currency (OCC) took a number of steps to weaken the Community Reinvestment Act, propagated high-cost lending through risky “rent-a-bank” arrangements, proposed a dangerous and ill-conceived “Fair Access” rule, and even attempted to redefine what is considered a bank. New leadership at the agency has the opportunity to reverse many of these concerning actions and take other much-needed steps to ensure that the OCC fulfills its statutory mandate to ensure fair access to financial services, credit and capital. This panel will lay out how the incoming leadership can reset the agenda at the OCC and put the agency back on track.
Speakers:
- Graciela Aponte-Diaz, Director of Federal Campaigns, Center for Responsible Lending
- Gerron Levi, Sr. Director, Govt Affairs, NCRC
- Robert Morgan, SVP Innovation and Strategy, American Bankers Association
- Kevin Stein, Deputy Director, California Reinvestment Coalition
Transcript
NCRC video transcripts are produced by a third-party transcription service and may contain errors. They are lightly edited for style and clarity.
Stein 00:44
Hello NCRC family. Welcome to our panel entitled OCC back on track. I’m Kevin Stein, I’m Deputy Director at the California Reinvestment Coalition, a proud member of the NCRC board of directors. And I’m grateful to have been asked to moderate this panel. I think most folks know about the OCC and why we are having this discussion at this time. But it may be for others. You’re wondering what exactly is the OCC? And why do we seem to care so much about it and what it’s doing, and we do care a lot about it. We do so because the Office of the Comptroller of the Currency as the regulator of national banks can have such a huge positive or negative impact on LMA communities and communities of color. As most NCRC members know, the OCC tends to regulate the largest financial institutions. So we’re talking about the likes of Wells Fargo, Bank of America, JPMorgan Chase, and, and others. The OCC through its supervision, enforcement and rulemaking authority really sets the standards for how national banks interact with consumers and communities. And in fact, it actually determines which institutions have the privilege to do so. An article in the American banker just yesterday, quoted from NCRC, as well as one of our panelists Rob Morgan, about OCC bank charters that are allowing new entrants into banking, though perhaps without imposing the same requirements for consumer protection and reinvestment that we all expect from banking institutions. Now, it’s no secret that many of us have been fighting with the OCC. In fact, community groups have had disagreements with the OCC for many years. Just think back to before the foreclosure crisis, when the OCC was working to protect national banks from having to comply with state and local predatory mortgage lending laws. But it does really seem that the issue the concerns have grown in the last few years. Just a few days ago at the conference, we heard Senator Brown speak to conference participants and in talking about some of the things that really needed to happen for communities to stabilize and and thrive. He mentioned a number of issues that he had with the OCC. Last year, my organization had so much concern about what the OCC was doing in our view to weaken the Community Reinvestment Act that we joined with NCRC to sue the OCC in hoping to stop it. And there have been a number of issues. So we have the horribly named fair access rule, which the OCC articulated as a way of standing up for access to banking, not on behalf of underserved communities. But on behalf of polluters, private prisons and gun manufacturers. The OCC also changed policies to streamline bank mergers, and to qualify when whether and how findings of discrimination would impact CRA ratings. Then there’s the true lender rule, the FinTech charter in a number of newer bank charters that we’re going to hear more about today. On a more hopeful and positive note, as part of NCR C’s advocacy week, last week, the California delegation of community organizations and member organizations was lucky enough to meet with the acting comptroller Paulson and members of the OCC staff. We had a good discussion, and we really felt like they listened to our perspective and we really appreciate that. We also know that change is coming with the OCC. Jesse mentioned on Monday that the administration is moving to install a new acting comptroller. And we’re all awaiting the nomination of a new comptroller which could change the direction of the OCC. But until then, to help us understand what the OCC has has been up to recently. We have a terrific panel. First we’re going to hear from an NCRC member favorite Gerron Levi, who is Senior Director of government affairs for NCRC Gerron, as people know, has been fighting for us every day in the halls and zoom rooms of Congress. And for that we thank her. Gerron is gonna focus on the CRA. Then we will hear from Graciela Diaz upon day and NCRC and CRC friend at the Center for Responsible Lending. Graciela is the director of federal campaigns at CRL, based in Washington DC, where she works to secure state support for federal policy initiatives. on grass yellow also worked a number of years in California leading a coalition to fight for an interest rate cap in 2019. And even before that helped us in California when our strong Homeowner Bill of Rights while she was at nclr. Now who need us us? And then finally, we are really lucky to have Rob Morgan. Rob leads the American Bankers Association of office sorry, the ABS Office of Innovation. Rob, led the ABA FinTech task force, which developed the ABA is FinTech play book, and other resources that are available on their website. We’re gonna have each panelist speak for about 10 minutes, and then we will take questions. So we hope you have some good questions to ask of our great panelists. And we’re going to start by turning over to Gerron Levi of NCRC. Gerron.
Levi 06:41
Well, thank you, Kevin. And good afternoon, everyone, I feel like I should time myself so that I stay within the limit. But it’s really a pleasure to be sitting here with you in 2021. I will say it is a far more positive and, you know, far greater prospects for the Community Reinvestment Act and our vision for how to modernize it and reform it in 2021. Then, the last several years, as Kevin mentioned, we really spent 2018 2019 2020 on the defensive, because of really the OCC putting forth a proposal around the Community Reinvestment Act CRA that we saw, and many, you know, advocate saw and many in the industry opposed as well. But that we saw as diminishing CRA as a powerful tool in the marketplace, incentivizing banks to lend invest in provide financial services and bank branches and all of that in low and moderate income and underserved community. It’s been a very powerful tool since it was enacted in 1977. It has really brought far more opportunities to low and moderate income families and communities and communities of color. This obligation under CRA so we were really we spent the last several years on the defensive with a bad OCC rule, really a rule that was proposed by two regulators, ultimately finalized only by the OCC really an anomaly in the history of CRA the three bank regulators. The OCC, the FDIC and the Federal Reserve, are really the three regulators that implement CRA have, from the vast majority of the history, really the entire history of CRA acted jointly in consensus in consensus on how to implement the rule. But here you had one regulator moving along with a bad rule. And so we’ve spent the last three years on defensive but you know, I think going ahead we’ve have a much of the stars really have a line in a lot of ways to create a productive environment for CRA, positive CRA reform and modernization. So what are what what has happened? First of all, as you all know, the climate overall and the nation is more positive. We have a national dialogue raging about racial equity, rate the racial wealth gap, larger equity in a larger equity conversation and you know how to bridge so many The access to credit financial asset gaps in the the economy, particularly for communities of color and borrowers of color. And CRA is definitely part of the solution for policymakers in Washington, including a more favorable OCC CRA is is among the tools in the toolbox to it when you start to look at how to bridge the gaps, how to make the economy function more fairly. for low and moderate income and communities of color CRA is definitely the tool to do that it was acted as a remedial statute to remedy decades of bank redlining. The you know, the exclusion of communities of colors and borrowers of color CRA was the remedy for that, in addition to the anti discrimination statutes, CRA was sort of the almost like the affirmative action in the financial marketplace, the affirmative tool to remedy some of these bad practices. We also have a new president, obviously a Biden administration and a president who came to office with a commitment to CRA and a vision to strengthen of the rules around CRA and with a vision more consistent, and, you know, in alignment with NCRC, our members and allies. He’s also will appoint regulators at the OCC but also at the FDIC. And to the extent they’re openings at the Federal Reserve that again, share our commitment to bringing financial assets resource resources, better access to credit to to low and moderate income communities, borrowers of color communities of color, just a commitment to racial equity and CRA is one of the primary tools to make that happen. Um, so a positive conversation, a president with a commitment regulators who share our vision. And you know, we couldn’t have in Chairwoman Maxine Waters at the house atop the House Financial Services Committee and Chairman, Sherrod Brown atop the Senate Banking Committee. I mean, we really could not have more supportive, stronger and more powerful allies on CRA, I can distinctly recall, in 2018, I believe it was Chairwoman waters coming from off of Capitol Hill and her chair woman ship to go to the FDIC with virtually every senior member of her staff to urge the FDIC to not join the OCC on their bad CRA rule. I mean, that’s how much I mean, that is a rarity. She came from off capitol hill to the agency in person with all of her senior staff, it must have been like eight of her senior, her most senior staff. But that’s the level of commitments. She’s also, you know, convene multiple hearings, that committee has convened multiple hearings, she’s led letters, led legislation, disapproving of what the OCC was doing, um, we couldn’t really have a stronger, more stronger ally there as well as several other members of that committee who did tremendous work. Congressman Meeks and others on that committee who really led significant work. We also couldn’t have in the Senate, you heard Chairman brown of the Senate Banking Committee, but even as a ranking member, he wasn’t chair but again, crowd so much support of in opposition to what the OCC was doing, asking tough questions that hearing leading letters and so on and so forth. So we have really strong allies at both committees of jurisdiction. Um, and so you know, the the stars have aligned as I would say, so we’re really poised to make significant progress at the OCC which was leading in a bad way. We are hoping they will lead now in a great way. And so with all these stars align, it still will be take a substantial advocacy push and will be a real challenge to get Everything we want out of this moment, it’s a rare moment. And so we are pushing ahead to get the most we can out of it. So what do we want so on the regulatory front with the OCC, we want to rescind that bad rule. I think our campaign and our advocacy really slow down the process. Many pieces of this bad rule are pushed way out to 2023. So we have a window where we can really rescind that rule, there are only a couple pieces of it that are in effect. So that’s top of the house for the OCC OCC rescind your bad rule. We will also want to see an interagency process where again, all three regulators come back together behind a joint interagency approach that again more aligns with our vision, all of our members NCRC number of our members or everybody at the table has filed comments on what we want to see a new CRA will look like. So we look forward to building consensus around a better approach using the Federal Reserve’s alternative as as as really a base. And we want to see a more race conscious CRA. And so we’ve got to bring the OCC on to that I think the Fed has done important work and kicking off that conversation. We want to see see more there. More broadly, I will say we also have legislative goals, given just the conversation going on in the country and the scale of the racial equity challenge. And with just the larger equity challenges, banks really can’t be the only financial institutions largely across the fant financial sector that have a duty to serve, or an affirmative obligation to serve low and moderate income and underserved communities. So we really look forward to having a broader conversation about bringing more financial, more participants in the financial marketplace, under a duty to serve low and moderate income and underserved communities. So with that, I think that’s that’s where we stand on CRF reform at this moment. great opportunities ahead and real work ahead. Thank you.
Stein 17:32
Thank you, Gerron. That was great. I appreciate the hopeful nature of that. And I also appreciate you. Having mentioned the leadership of Congress, woman Chairman, Maxine Waters, who has been a champion for many years. And, you know, I reminisce a lot. And so that has me reminiscing about a hearing at the federal, I think at the Federal Reserve, maybe 10 or 11 years ago on CRA where community groups were showing up to testify on how CRA needed to be strengthened. This was over a decade ago, I believe. And certainly race was one of the issues that has always been identified as a gap and CRA. And who should show up at this hearing, but Congresswoman Maxine Waters came to testify about the importance of CRA, which shows how long people have been, you know, thinking about CRA appreciating CRA, but really hoping to strengthen it and make it do all I can for communities. And a big piece of that also is ensuring that banks are being responsible actors in communities. And maybe that’s a good transition to the true lender rule. And so we’ll turn it over to grass Graciela Diaz upon today from the Center for Responsible Lending to talk us through that. Thanks Graciela.
Aponte-Diaz 18:58
Hi, thank you. Thank you, Kevin. And thank you for inviting me here today to discuss how the OCC can get back on track when it comes to protecting consumers, and specifically regarding rentenbank schemes. So last year, the OCC proposed a rule that we’re calling the fake lender rule. I know you refer to it as the true lender rule, but we’re referring to it as the fake lender rule. And you’ll you’ll see why in a moment. This rule is the existential threat to state interest rate limits that protect consumers from predatory lending. Since the American Revolution states have limited interest rates to stop abusive lending, so I want to pause there I do have some slides. I don’t know if we can bring those up. Okay, wonderful. Thank you. So on this map, what you’ll see is that there are 18 states and the District of Columbia that cap rates for payday and car title loans at 36% or less. So these are your typical $400 loans that must be repaid back in two weeks. Next slide. On this map, you’ll see that there are even more states with a cap for installment loans of $2,000. With a two year loan term, all the states in turquoise have a cap of 36% or less. And then there’s also all the states in yellow that have a cap bringing the total up to 41 states. Most recently, we Illinois passed a cap. This was just March of this year, Nebraska, California, Colorado and South Dakota in the past couple years. They’ve either passed it through the state legislature or through a ballot initiative. And it’s been to address caps for payday loans. And for installment loans. Nebraska passed their ballot by 83% of the vote in 2020. Let’s go to slide three, the next slide. So in this map, you can see that the interest rates are actually decreasing as the loan amount increases, which is definitely what it should do. So a median APR for all states, the cap is 25% on a $10,000 loan. Next slide. So states have historically have strong interest rate caps, many states are still fighting for caps. But what the OCC fake lender rule does is it takes away the option of state interest rate limits takes away the option for states who have it to defend their limits through the courts. Next slide. So the next set of slides, I’m just going to briefly describe the rentenbank scheme. And how predatory lenders are laundering their loans through banks that are supervised by the OCC and the FDIC. So next slide. Here your players so the predatory lender, or non bank lender, these these folks are subject to state interest rate limits. Some of these are storefront payday lenders that are now offering installment loans online or some of these guys are, you know, using the guise of FinTech and innovation and offering loans strictly online. The next player is the bank. So this is the bank that’s supervised by the OCC or FDIC, these banks are not subject to state interest rate limits. So the banks involved in this scheme, it’s not your big banks like Chase and B evey, it’s actually some less known banks like findwise, and Republic bank out of Utah and Kentucky, for example. And finally, the other player is the consumer. So next slide. So what you’ll see here is the the predatory lender, taking the loan application from the borrower. Next slide. The predatory lender processing the loan application and sending it to the bank. Next slide, the bank sends the money to the consumer. Next slide, the bank sells the loan back to the predatory lender who gets a small cut of the profit. And finally, the consumer pays back the predatory lender. So that’s sort of the dynamics that are going on behind the scene and how we’re calling it loan laundering, right? Because by by partnering with this with the bank, the predatory lender can now evade the state interest rate limit that the bank is not subject to. Next slide, please. Hence why we had to do these cool graphics because it’s kind of complicated, but I hope that helped. And we have more resources to help walk folks through what this rentenbank scheme is. But um, here’s an example of a loan. So this is a loan by lender called rise it’s a so these are larger than payday loans. So I wanted to kind of break it down. This is a $3,000 loan 148% APR, the loan payments are 190 bi weekly, and the total amount paid is $7,980. So that’s so 4000 or so more just in interest. So that’s one example this loan is is given out in various states that currently have state interest rate limits. So that’s the problem. Some of the harms that come with this is, as you see here, borrowers paying double or triple the amount that they borrowed, damaged credit, bankruptcy, repossession of car if it’s secured by your car, there’s even some loans that are secured by the borrower’s home. We’ve seen this in in small business loans. So you know, we’re in a time of COVID, where small business lenders are looking for help, and they’re getting these types of loans. And like I said, even worse secured by your home. Next slide. So, these loans are targeting African American and Latinx borrowers, these are the same communities that are disproportionately target impacted by COVID. Due to systemic racism. So this is, you know, what some lenders are saying, are calling access to credit. And we say this is not what our communities need. This is not access to credit, it’s access to debt. One example of a couple a couple reasons we were saying that these are these are targeting these communities. One is, you know, typically payday loan stores are concentrated in African American and Latino communities. And these same borrowers that are going to these stores are now getting this marketing for these new online loans. So I want to pause there also, just to give one example of a lender, opportune who’s using rentenbank scheme, they’re actually applying to the OCC to become a national bank. But in the meantime, using the rentenbank scheme to to issue their loans. And Oprah Dune is deaf is someone who is marketing to the Latino community heavily, we see that through their marketing, and why I’m sure you guys have heard sort of the abusive debt collection that has been discovered by overtone. And so this is, you know, this is a lender who is lending at 36% or less, but that is not all that is required for a safe loan. So that’s just one example of targeting, and a renter bank lender. Next slide, please. I should before before I go there just want to pause and say, you know, these these rentenbank schemes ever since the FCC proposed this rule. Last summer, we have seen more lenders doing this. But um, but before back in the in the late 1990s, early 2000s of payday lenders were using the rentenbank scheme. So again, payday loans being the smaller $400, you have to pay them back in two weeks, what we’re seeing now are installment loans. So your larger loans, longer term, the OCC and the FDIC had cracked down on this practice back in the late 90s. And so we are seeing a reemergence through these through these new larger loans. We’re seeing rentenbank in almost every state. And just to I can easily tell you what the rule says because it’s like a couple sentences long, but basically says that the bank is named I’m sorry, the OCC rule says the bank is the true lender, so long as the bank is named as the lender on the loan document. And so what states have, you know, states that have a strong interest rate cap, they fought in the courts to say the predatory lender is in fact, the true lender. Because they’re, you know, they have the most at stake in this they’re getting the most profit from this loan, they’re doing the most work, and therefore they must abide by the state interest rate limit. But with this OCC rule, what it’s saying is that, well, the bank’s name is on it. So they can be the true lender, which means they’re not subject to the to the state interest rate limit. So that’s how short this rule is, but it is extremely damaging and takes the state’s rights from different for defending their state interest rate limits. Next slide. Okay, I don’t have any more slides after that. But I just want to Oh, actually, if you could put that one up just for a moment I’ll just talk about these are just some resources that that folks can look at and get more information about the rented big scheme where it’s happening. But just wanted to pause there and say, and now I don’t have any more slides. If you want to take off the PowerPoint, so luckily, we have a window of time for Congress to repeal the occs. Fake lender rule. So this is another CRA different from what Ron described, this is the Congressional Review Act that Congress has the power to, to repeal this rule. And so there is a short window of time since the passage and so the passage of the final rule, so we have until May 21 of this month to get this passed. Senator Van Hollen, Representative chuy, Garcia have introduced a resolution to to pass a CRA. And so we’re hopeful that that will that that will happen. Um, other things just to note, the most the current OCC has been pushing to defend their fake lender rule. And so we have put together along with nclc and CRL, a rebuttal to some of those arguments that the current FCC is making. So we are very encouraged that the Biden administration has on his tape is taking steps now to install a new acting controller. And what we would like to do is ask the OCC to take a pause on Well, one defending the this, this this harmful rule. And we’re hoping that the new Acting Director can support the Congressional Review Act on this, we think it’s the best and fastest quickest way to get relief to families. We also would like the OCC to pause on any national bank applications from non traditional bank charters, and definitely any charters that are currently being investigated by other federal agencies. So again, going back to opportune who’s being investigated for their abusive debt collection by the CFPB. So those are some things that we urge you to do. And, and also others who want to do more and can help, please call your senator, please call your representative and ask them to to support the Congressional Review Act of the occs true lender rule. And also just want to take a moment to thank all the advocates on this call, who have been working really hard on this already, and making calls during press participating in social media. Thank you, and I look forward to your questions.
Stein 32:52
Thank you so much. Graciela. Oh, that was terrific. There was a lot of great stuff in that, including, you know, there’s an opportunity for folks to engage this is happening now with the fake lender rule. And with regard to the what we think of as the other CRA the Congressional Review Act, in answer to one of your earlier questions, the slides were terrific. And I imagine people are going to want to see them so. And I imagined that there NCRC is going to make them available to folks. And you had also in talking about opportunity, you made a call for a pause on new bank applications. So in terms of like, where we’re where we have been and where we’re going in this conversation, Gerron starts us off talking about maybe the thing that’s NCRC members are most familiar with, how are banks interacting with communities under the Community Reinvestment Act and what are the rules requiring them to do so? And then we shift to Graciela talking about how are banks enabling non banks to evade state consumer protection and rate cap rules? And what’s happening suggested in Graciela was written remarks is that there are a lot of applications to become banks. There are a lot of there are a lot of entities that want to become banks. And they’re not the institutions we’re used to thinking of as banks. And I think this is where Rob is going to help us. And I just would also know Grassi I was called to a pause on a new bank applications, so the opportune application opportunities, maybe a non traditional lender, but it’s seeking straight up. National Bank charter, kind of charter we’re kind of used to seeing, but there are a lot of charter applications that are newer and different. And I think Rob’s gonna help us understand that a bit better. So let me turn it over to Rob Morgan. Rob, we really appreciate you being here from the ABA.
Morgan 35:09
Well, thank you, Kevin, appreciate the opportunity to be here. And the kind introduction really honored to be here in front of this audience. And and thanks to the the other panelists, you’re all a tough act to follow. As Kevin mentioned, I’m here to talk about sort of the universe of new bank charters that we’re seeing both of the OCC but elsewhere. And taking a step back. This is part of a broader trend that we’re seeing where as FinTech is reaching maturity, they’re trying to get mass market appeal. And in doing that, they’re often trying to look more like banks. And there are a lot of reasons for this. And in many ways, in some cases, this can be a good thing. In when these companies become banks, as we think of banks today, they are subject to more stringent regulation, more proactive oversight, which means better outcomes for consumers. Unfortunately, we are also seeing a number of cases where these companies are looking for the privileges that come along with being a bank without the same sort of oversight or supervision that ensures those good outcomes. And specifically, one of the trends we are seeing is a move towards creating non depository banks. We’re seeing this again at the state level and the end at the federal level. And the reason for this is really to have a pure play at regulatory arbitrage. And what I mean by that is, there are a lot of rules and regulations in the US today, that tie to offering insured deposits. And this is because insured deposits traditionally have been a good proxy for what it means to be a bank. And you know, to be clear, from an ABA perspective, we represent banks, we think more banks are a good thing. We welcome innovation, new business models. But what we don’t think makes sense is to create new regulatory structures that set a lower bar for safety, soundness, and consumer protection. And that’s exactly what we’re seeing with some of these non depository charters. So the reason that, we’re able to get a little bit tactical about why these companies are looking for non depository charters, as I mentioned, there are a couple of very important regulations that are triggered by deposits. One, the Community Reinvestment Act, the first CRA that is triggered by holding insured deposits. So any institution that is a non depository, novel charter wouldn’t be subject to CRA. The second feels a little bit wonky here, but I think has equally important impact here. And it’s the application of something called the bank holding company act. What the bank holding company Act does is ensure that the entity that owns a bank is regulated the same way as the bank. So it provides that same sort of oversight and supervision. This is really important from a safety and soundness perspective, it’s what prevents banks from putting other activities outside of the regulatory purview. So it would allow some of these FinTech companies to run some of their business through the Chartered Financial Institution through the bank. And then while off some of the others that they didn’t want subject to that same level of scrutiny. It’s also importantly, what provides the divide today between banking and commercial activities. There’s a lot of history in the US separating those activities. And what it really means is that banks can’t own large commercial platforms, just like large commercial platforms can’t own banks. So this is the thing that keeps big tech companies, for example, from owning banks. So changing this has really drastic implications on the financial system as a whole today. And we’re seeing this happen at both the state and federal level. We’re seeing either new charters being brought into existence, that are created to get around some of these regulations, or an abuse of existing narrow purpose charters to try to back into what is really a full service bank. And so let me just start quickly with the State of Wyoming where they’ve created something called a speedy charter. This is a special purpose depository institution. This charter is aimed at the sort of crypto companies that are looking for, again, those privileges that come along with being a bank, particularly payment system access is one. And the second is the ability to call themselves a bank. That’s something that carries a lot of weight with consumers, and something that implies a certain level of regulation and protection. And so by creating this charter, these institutions hold deposits but not insured ones. So again, they don’t trigger all of these same rules and requirements, but they’re trying to use that as a platform to access the national payment system and to access consumers throughout the country. We’re seeing this at the federal level as well at the OCC, there have been initiatives for years dating back to I think 2017 the OCC and 2017. Under action Congress started under comptroller curry begin the process of evaluating something called a special purpose National Bank, it was cool colloquially referred to as the FinTech charter. This was designed to create a non depository bank charter for some of the marketplace lenders that they were seeing in the market. And while we had some issues with that, I think the one thing you can really give the OCC credit for as part of that is they had a really open and transparent process, they saw notice and comment, I think two or three times got the public’s feedback before moving forward. Ultimately, they were challenged by a number of different groups by the state banking regulators, as well as the New York state regulators. And so that has been held up. When acting comptroller Brooks came into office, he brought a crypto background and made no no secret of the fact that he wanted to use his position to help promote crypto adoption in the US. And he made a series of changes that were designed to be really seemingly small changes that would have outsized impact, to allow crypto companies to enter the banking space with these sort of non depository models, that again, we think, open up the door to really serious regulatory arbitrage, leaving consumers exposed. So he began by proposing something that was actually very similar to the special purpose national bank that he called a payments charter. The biggest difference here is that there wasn’t much process around this. His claim was that the payments charter, or at least what he was calling a payments charter was that he already had the authority, he didn’t need to go through notice and comment or create a new vehicle to charter non depository institutions. And that’s because the OCC mandate defines a bank as someone who does one of three activities, which is taking deposits, making loans and facilitating payments. His argument was, you could charter any institution that did just one of the three. The problem here is, again, that many of those regulations are really designed towards and triggered by the deposit taking activity. So well, it’s a sort of a seemingly narrow interpretation. It’s one that has really big impact. So we saw applications for this charter and raise concerns about that. And this day, banking regulators have already filed suit to try to stop that. The sort of last iteration here, and one that is, in many ways, most acute today is the abuse of an existing charter. So trust charters are charters that have existed for years, that act as fiduciaries and help their customers hold assets. They don’t act like a bank, they don’t lend. They don’t act and all of these other businesses. And what acting comptroller Brooks did was look to this charter as a way to back into offering these sort of non depository charters. And so in doing so he really fundamentally reimagined what a Trust Bank is. And this is something that we’ve all raised concern about. And I’d say we meaning a lot of those represented on the panel today, the set of charter applications that came in raised a lot of concern, not only because of the implications of this non depository model, but because of the lack of transparency and how this was being handled. So we joined with NCRC, nclc, and CRL, as well as about seven different banking and credit union trades. To raise these this issue to the OCC and ask them to slow down seek public comment before moving forward with such a groundbreaking change. After that, we also sent them a letter specifically on the trust charter. Given the applications we were seeing, because the applications we were seeing we didn’t believe met the criteria to be a trust charter, which was the requirement to engage in fiduciary activities. We sent that letter on a Friday, the following Monday, the OCC issued a new interpretation of existing law something called an interpretive letter. It was interpretive letter 1176 for those of you who are keeping score here, and that interpretive letter is exactly what reimagined what it meant to be a Trust Bank. And what they did was removed that long standing requirement that trust banks act as or engage in fiduciary activities, and deferred the definition of a trust to the states. So effectively, what they said is if you qualify as a trustee in any state, you qualify at the national level and are welcomed to be become an OCC National Trust Bank. So two days after that they approved the first application, the ones we had raised concerns about and that same day, the acting comptroller resigned, and has since returned to the crypto industry. So this is something that we think raises serious concerns. It’s one where we think they should pause, take a step back and seek public comment. And with that, again, happy, thank you for the opportunity to be here and happy to answer any questions.
Stein 45:21
Thank you so much, Rob. First of all, I guess I’m glad to hear that the ABA considers the Community Reinvestment Act with the first CRA. So that was that was good, too. I suspect that as much but it’s good to have that confirmed. And I also want to, you know, you mentioned regular regulatory arbitrage so and maybe to some extent, that idea is kind of permeate permeates all of this, that to the extent we don’t have uniform rules, then you have institutions trying to game the system. So some, try and avoid having CRA responsibility, as you’re suggesting, maybe. And then, but we also have this problem, if the, if the banking regulators have different CRA rules, then we’ll some institutions, charter, you know, shop for their regulator, because they prefer a lower bar for CRA responsibilities. And and maybe similarly, the true fake lender rule is implicated in this idea of just trying to find the easiest path. And that’s always or almost always to the detriment of consumers and communities. Maybe also give a quick shout out to I think Jamie mentioned chime. So you were talking about how some like to say their banks that that has value to them, and chime got dinged by our the California State Department of the FBI, financial protection and innovation are new mini CFPB that we’re really glad to see exist. And so they I think today just settled with China to say, be careful about how you’re representing yourself, because you’re not exactly a bank. So apologies if I don’t have that exactly right. Let me throw out a first question and invite people to chat questions. I see people have been chatting. So appreciate that appreciate people being so engaged. But just knowing a few of you kind of alluded to this, knowing that maybe that changes are coming at the OCC. I’m wondering if each of you might speak to how how you see that whether it’s the new acting comptroller who’s supposed to come in any ideas about a new comptroller who that might be or what that would look like? And will it make a difference for an agency that really, you know, comptroller’s come and go? And I’m not sure how much the agency changes. So just curious as to how you all think, whether it’s regard to your, the issues you talked about today, or more broadly, how you see things changing, if at all with changes at the OCC and maybe you start with I was gonna say Gerron, I don’t know if you’re on. If not, maybe we can go to grace Yella. There you are, do you want to take that first run? And it looks like you might be on mute?
Levi 48:29
I’ll let Graciela you take it away first. And I’ll chime in there.
Aponte-Diaz 48:35
Yeah, you know, I’ve mentioned this a little bit in in my remarks, but we’re we’re hopeful we’re encouraged that the Biden administration has, you know, indicated that they’re at least moving forward on an acting, we would really like to see a nominee in there, that’s going to be a move forward to get appointed and approved by the Senate. I’m really hoping, you know, selfishly, for this subject that we’re working on on true lender, someone that’s really going to, to defend, to help states defend their state interest rate limits. And so this is, um, you know, we’re hoping for someone who’s really going to take on predatory lenders and not let OCC supervise banks allow predatory lending to continue to happen. So, so that’s what we’re looking for someone who’s going to be really strong on consumer protection. We’ve had four years of a lot of dismantling of, of strong consumer protection rules, and we really need a strong consumer protection advocate in there.
Levi 49:50
Yeah, and, you know, not much more to add to that. I would say, you know, we are sensitive to the time you know, So we want someone with those kind of Sterling credentials. We’ve, you know, been very engaged in this conversation, but I am glad the secretary Yellen is moving ahead. Because even with an acting comptroller, we can start to get some things in motion, certainly around CRA, for example. So we really look forward even with the acting comptroller working to get the ball rolling. And then when we have someone finalized in that position, you know, moving full force ahead. You know, we we take every moment every year as precious time to move, move, you know, our advocacy agenda to really maximize this moment, as I said, it’s a rare moment, we got to maximize it. So that’s it.
Morgan 50:54
And I don’t have a lot to add there. We’re sort of waiting with bated breath like the rest of you here. The only piece I would add is, you know, as it pertains to reimagining what it means to be a bank, we’re really hopeful that new OCC will proceed in a really open, transparent way and seek public input.
Stein 51:14
Thanks to you all, Rob, you, you mentioned that some like to be seen as banks that there’s some value in that you also talked about why institutions might seek to a special charter to limit some of their constraints. Can you say more about why some of these institutions want to become banks? No. So why does opportunity want to become a bank? Why do some of these cryptocurrencies want to become banks, etc?
Morgan 51:44
Yeah, happy to. And I think there are sort of two main reasons I’ll point to and the first is, I think I said in my remarks, the term bank carries a lot of weight with consumers. And it’s because of the regulatory structure and the oversight that exists with that. If we start, you know, a lot of these companies, I think someone pointed out in the chat, that there are a number of companies that want to call themselves banks, that may not be right, and, and they’ve got even gotten their hand slapped for some of those, those sorts of things. And so, you know, I think from this perspective, it’s really important that we have a consistent meaning that sets that high bar for consumer protection, that’s also deals with things like access to the shared infrastructure of that is our nation’s payment system. So, you know, the Federal Reserve payment system is critical infrastructure in this country. And today, there is a really high bar to access that have strong regulation and oversight, again, to make sure that that system that we all rely on every day, keeps its integrity. And so, again, we’ve seen the Federal Reserve is taking a look at who is able to have access to this and answering some of those tough questions around whether or not there is sort of equivalent regulation and oversight and addressing some of those risks today. So we’re really excited to see that announcement yesterday. But a lot changing in the space very quickly.
Stein 53:07
Thanks, Rob. I think you know, you all talked about issues that are open and evolving. And Brad was asking a good question about are there opportunities for all of us to work together? Do you and I think some of you touched upon this. But if you could say more about ways in which consumer groups, community groups, reinvestment groups and the industry in particular, are there overlapping zones of interest, where we can work together on some of these issues?
Morgan 53:44
Yeah, I’ll take a quick response there and would welcome others view as well. But I think absolutely right. We’ve really enjoyed our partnership with you all on these issues. And I think at the end of the day, we all have a shared interest, which is bringing more American families into the financial system and getting them safe, responsible financial products. So and we may not always agree on the way to do that. But I think we we all share that interest and look forward to working with everyone on the screen and those listening as well.
Levi 54:10
Well, we’ll definitely I will say, you know, one of the things that the ABA just put out this week was a call with other trades to rescind the OCC rule. We’re obviously aligned on that we’re on the same page. We’ve been working together quite a bit, you know, around CRA, I think there are opportunities around this charter discussion. Um, you’d be surprised but we are talking about some of these issues that have been raised today, you know, the charter CRA things like that. So, absolutely, there are opportunities for us to work with work together with the advocates that you know, NCRC and ABA, but also see our scrl and us work together all to all the time of course but but Definitely between industry and advocates, you know, we’re talking about a number of issues.
Aponte-Diaz 55:09
Yeah, I’ll just add that. Yeah, for sure. CRL we we work on on all of these issues on? And, you know, I think this both both CRS impact the same families, right, like, this is, you know, goes back to structural systemic racism, and and, you know, where our families are. And so you have, you have active predatory lending right now that’s keeping our families in debt, and not able to save up to purchase a home. And and, you know, so both of both of these sort of series work together. And, you know, as far as, as the industry, you know, there are credit unions, obviously, that are that, not obviously, but like, luckily, they’re in support of this Congressional Review Act of the true lender rule. There’s also lenders who are kind of self regulating themselves and saying, okay, we’re not going to lend out more than 36%. And thank you for that. And I just asked that we go even further, right, like, make sure that the underwriting is strong, make sure there’s not abusive debt collection. Because, you know, 36% is a great number for your small dollar loans. But once you get to 510 $1,000 loans, it can be quite expensive. And so, um, so I think there is ways for folks to work together. We just like to push you more. That’s all.
Stein 56:44
Great, thanks. Graciela. So you, you for raising the issue of race, I see that, which has come up a few times. And I think Antoine said, sent a note in the chat representing de Rab, this expressing disappointment with the OCC in their, in their treatment of race. And I just wanted to throw it to you all, maybe an open ended question, which you’ve started to answer. How do you see? How do you see the OCC and other regulators having the opportunity to do better on race? So there’s a lot of conversation about race, we’re talking about the OCC, probably similar arguments can be made with the with all the agencies? What what can and should the agencies be doing? And if there’s anything that your organizations are doing that you would want to raise at this point, as we’re getting set to wrap up?
Levi 57:48
Well, I’ll start with what you know, I mentioned early on, I think the Federal Reserve really sparked around CRA the Community Reinvestment Act. With the question too in their advance notice of proposed rulemaking, they really opened the dialogue around CRA and race. And certainly one of our objectives is to implement a more race conscious CRA. So and we’re built, we’re, you know, building out a conversation around that. But I do think there is real opportunity in a new CRA framework to include race in both, you know, the quantitative and qualitative considerations. And so, yes, we will have to bring the OCC into that conversation and, you know, develop an interagency approach. But I think it’s a very important conversation there. There are constitutional parameters we have to work within. But nonetheless, we are definitely seizing the conversation that the Federal Reserve has opened. And we’re, you know, looking to work with both the OCC and the FDIC on how to really incorporate that in a CRA framework going forward. I mean, it just for folks who aren’t aware that the statute is explicit on income, low and moderate income neighborhoods, but not really explicit on race, however, there is language in the statute about the entire community. And you know, that obviously, the entire community includes communities of color. So we do think there’s more opportunity to incorporate more race constant conscious considerations within the framework and within the constitutional limitations or parameters.
Aponte-Diaz 59:58
Kevin is there is there Time to respond to we’re at the hour.
Stein 1:00:02
Yes, we were at the hour, but I understand we can go for an extra couple minutes. So I, so I think no one’s pulling the plug. How about this info? Maybe they will, but I don’t know that they will? I’m certainly not. Why don’t we you finish the two of you and take your time. And then I’m going to ask you, if you each want to take a few seconds, 30 seconds and make any final concluding remarks. So maybe we’ve got another five minutes or so.
Aponte-Diaz 1:00:29
Okay, great. Thanks. So just on the question of race and, and racial justice and equality. You know, the, I heard the former Acting Director Brian Brooks, and in in a speech last year, talk about, you know, fintechs, and access to credit and how important it is to help you know, African American and Latinx families. And while that may sound good, it is not it is what we’re seeing are predatory loans of 100 200% APR. And that’s not the type of access to credit that our communities need. We saw with the predatory mortgage loans that created the foreclosure crisis. It Yes, it was, it’s important that our families have access to purchase homes, but not with exploding interest rates. And the same thing is happening here. This is not the type of access to credit that’s going to help our families get through COVID get, you know, and all kinds of things that they need to for their small businesses and their families. So so that’s what we’re looking for is is for the OCC to, to do better, to do much better when it comes to the
Morgan 1:01:54
thanks. And I’ll just add quickly, this is something we’re really focused on from, from our perspective, as well, I think the pandemic really highlighted the challenges that families who don’t have access to financial services face, particularly in this acute environment. And unfortunately, communities of color, those numbers are much higher. So we need to do better, we’re working on doing better to reach those communities. And recently, we rolled out a program with a group called the cities for financial empowerment, to promote the bank on account standards. These are sort of low fee accounts, no overdraft accounts designed to address the reasons that can always report not engaging with the financial system. So we’re really working hard to promote those, and would give the FDIC kudos for the work it has done with its get banked campaign to try and help bring more folks into the formal banking system.
Stein 1:02:44
Thanks, thanks to you all for that. And, you know, and Antoine kicked us off by expressing disappointment in leadership around these issues. And I guess it would be remiss if I didn’t know that our organization filed a redlining complaint against a bank that was run by folks who became officials in the administration. So we kind of hear you on that. A lot of work to be done. And I think Gerron makes the key point for NCRC. Members, this is an incredible opportunity to try and have these issues addressed and CRA the Fed is asking about it. So a decade ago, we were crowding a room in the Federal Reserve saying race should be part of CRA amongst other things that need to be improved. Now we have the chance to do so I want to thank the panel so much. And that I do maybe this is an anticlimactic way to finish but to give you each, maybe 20 seconds, if there’s any final point that you want to make, you didn’t get a chance to make or to re emphasize something just to let you have your last word before we close?
Levi 1:03:47
Well, I just think this is a moment for advocates. As I begin, you know, this is a rare opportunity where the stars are aligning in a number of ways. You know, in terms of the Congressional makeup and the public conversation around these issues, and we not just you know, the speakers here, but all of you really have to see this as that moment and act act to seize it. We’ve really got to be aggressive in this moment to maximize it and get the most out of this opportunity. We don’t know how long it will last.
Aponte-Diaz 1:04:23
Yeah, and I’ll just piggyback off of that. I mean, that’s we’re absolutely in a moment with with racial and racial justice, racial economic justice, and on the margins are just so close with the Senate and the House and so we just really need advocates to be there and be vocal even though we like slim Lee have numbers to pass things we really need for for folks to engage and push on the Biden administration to really, you know, there’s a lot of work to do when it comes to consumer protection. and uplifting the communities that have been harmed. So, so please be there and, and help be vocal about these issues.
Morgan 1:05:09
And I’ll just end by thanking you again for the opportunity to be here today. This is a really important discussion. I look forward to continuing discussion and working with you all as we address these really important issues.
Stein 1:05:20
Super, thanks again to you all, terrific discussion. Thanks for those who stuck around and chatted and stay engaged. stay involved with NCRC keep tracking the issues and enjoy the rest of the conference. Thanks. Thank you
