On October 27, 2020, the Office of the Comptroller of the Currency (the “OCC” or the “Agency”) adopted a final “true lender” rule governing loans made under third-party relationships with nonbank entities, including fintechs, OCC-supervised national banks, and federal savings associations (collectively, “OCC Banks”). The true lender regulation was initially proposed on July 20, 2020 and summarized in a Nutter Fintech in Brief. 

The OCC’s stated goal is to provide certainty on the law that applies to loans made as part of OCC Banks’ relationships with third parties. The OCC determined that ongoing uncertainty on the law may “discourage banks from entering into lending relationships, which, in turn, may limit competition, restrict access to affordable credit, and chill the innovation that can result from these relationships.”

The final true lender regulation is substantially similar to the July proposal. The rule continues to provide that an OCC Bank is the true lender if, as of the date of loan origination, that bank (1) is named as the lender in the loan agreement or (2) funds the loan. The only substantive change is found in cases where there are two OCC Banks involved in a transaction. The final regulation provides that “[i]f, as of the date of origination, one bank is named as the lender in the loan agreement for a loan and another bank funds that loan, the bank that is named as the lender in the loan agreement makes the loan.”

The OCC rejected comments from consumer advocates who raised concerns over the Agency’s underlying authority to promulgate the rule and preempt state usury, predatory lending, and consumer protection laws. Those consumer advocates are expected to challenge the final true lender rule in court. Consumer advocates were particularly concerned with the potential for inappropriate “rent-a-charter” arrangements. The final rule’s preamble asserts that “rent-a-bank arrangements have absolutely no place in the federal banking system.” The OCC also pointed to its “robust” prudential and consumer compliance authorities and its pervasive supervisory processes over OCC Banks as means of ensuring that OCC Banks are held accountable for all loans they make, including those made through bank partnership arrangements.