True Lender Issues: One Step Forward, Two Steps Back?

Abstract

The true lender rule issued by the Office of the Comptroller of the Currency (OCC) briefly provided a uniform standard that could be applied to determine when a national bank is acting as a lender when it partners with other service providers. The rule was lauded for its objective standard that respected the form of legal documentation. The fintech marketplace lending platforms and banks that have been doing business for years under a bank partnership model viewed the rule as a welcome sign that the OCC did not support state efforts to recast the marketplace lending platforms as the true lender as a way to impose state law usury rules against national banks. Then Congress invalidated the rule under the Congressional Review Act (CRA) within six months of its effective date. Did the bank partnership model take one step forward and two steps back? In this article, we explore “true lender” issues, existing litigation and regulatory developments, and the implications following the invalidation of the rule.