Democratic Senators Sherrod Brown and Chris Van Hollen have introduced a resolution under the Congressional Review Act (CRA) to overturn the OCC’s “true lender” final rule. The rule addresses when a national bank or federal savings association should be considered the “true lender” in the context of a partnership with a third party.
To be eligible for the special Senate procedure that allows a CRA resolution to be passed with only a simple majority, the Senate must act on the resolution during a period of 60 “session days” which begins on the later of the date when the rule is received by Congress and the date it is published in the Federal Register. (If the period has not expired in the Congressional session during which the rule was adopted, it resets at the beginning of the next Congressional session.) The OCC’s final rule was published in the Federal Register on October 30, 2020 and became effective on December 29, 2020. Because the CRA 60-day period had not run before the last session of Congress adjourned, the 60-day period reset in its entirety in the new session of Congress that began in January 2021. If the OCC rule were to be overturned under the CRA, it would be deemed not to have any effect at any time and the OCC would be foreclosed from adopting a comparable rule.
President Biden has not yet appointed a new Comptroller of the Currency. One thoughtful commentator has suggested that the Democrats’ slim Senate majority makes a CRA reversal of the rule improbable. This commentator suggests that the CRA resolution is primarily a messaging tactic intended to highlight that a new Comptroller has not yet been nominated and to raise the profile of the issue in the hopes that the next Comptroller will reopen the rulemaking. However, in light of the discipline the Democrats have shown since the election, we would not rule out the possibility of a successful CRA resolution overturning the OCC true lender rule.
The OCC’s rule is also the subject of a pending lawsuit. On January 5, 2021, the Attorneys General of New York, California, Colorado, the District of Columbia, Massachusetts, Minnesota, New Jersey, and North Carolina filed a complaint in a New York federal district court, seeking to set aside the final rule.