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“True Lender” Rule Goes into Effect Despite Heated Pushback from Attorneys General

  • The Office of the Comptroller of the Currency issued a final rule to determine whether a national bank or federal savings association is the “true lender” on a loan in the context of a bank’s relationship with a third party.
  • The rule specifies that a bank is the true lender of a loan if, as of the date of origination, it is named as the lender in the loan agreement or funds the loan. The rule also specifies that in the event that one bank is named as the lender in the loan agreement while another bank funds that loan, the bank that is named as the lender is considered to be the true lender. In addition, the rule clarifies that the true lender retains the compliance obligations associated with the origination of the loan.
  • As previously reported, Democratic AGs objected to the rule during the comment period, arguing that it would undermine states’ usury laws and allow predatory lenders to circumvent states’ enforcement actions through “rent-a-bank” schemes.