On July 31, the U.S. Department of the Treasury released its planned Fintech report, “A Financial System That Creates Economic Opportunities: Nonbank Financials, Fintech and Innovation.” While the report addresses the regulation of a number of cutting-edge financial technologies and products, of particular interest to online and marketplace lenders is the Treasury’s recommendation that legislative solutions be implemented for the challenges posed by the Madden decision and recent “true lender” decisions (such solutions as including codifying the “valid when made” doctrine and the validity of properly constructed bank partnership programs), and its recommendation that the Office of the Comptroller of the Currency (OCC) move forward with considering special-purpose national bank charters for Fintech companies. Following quickly on the heels of the release of the Treasury’s report, the OCC published its long-anticipated position on a proposed new type of bank charter for online and marketplace lenders, and announced that the OCC would, effective immediately, be accepting applications for the new charter. On the same day, the New York Department of Financial Services reiterated its strong opposition to the new national bank charter, and voiced, in colorful terms, its view that the regulatory “sandboxes” endorsed by the Treasury would inevitably lead to consumer harm. While we will continue to analyze the Treasury’s recommendation and the OCC’s new charter handbook, our initial takeaway is that, of all the Treasury’s recommendations, the successful legislation addressing the Madden decision and clarifying the “true lender” cases are likely to have the most immediate and far-reaching impact on online and marketplace lenders. Pro-lender legislation in these areas would validate a bank partnership model and create a clearer path for nonbank lenders to offer nationwide financial products. We will continue to monitor legislative activity and case law development in this important and developing area.
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