ABA Supports ‘True Lender’ Clarity; Expresses Concern with ‘Overly Broad’ OCC Proposal

While welcoming the OCC’s efforts to clarify factors that identify the “true lender” of a loan made through bank partnerships with nonbank fintech firms, the American Bankers Association today expressed concern that the OCC’s proposed rule is overly broad. As proposed in July, the rule would identify a national bank or federal thrift as the true lender when it, as of the date of origination, is named as the lender in the loan agreement or funds the loan.

“Although these factors establish a bright-line test to identify the entity that is the true lender, the proposed tests may inadvertently and detrimentally sweep in other traditional lending or finance arrangements such as mortgage warehouse lending, indirect automobile finance, loan syndication, and other structured finance,” ABA said. “It is critical that the OCC identify precisely those financing arrangements to which the rule applies and the regulatory regimes for which the identification of a ‘true lender’ under the rule is applicable.”

In the absence of a clear test, courts have applied differing standards for determining which entity is the true lender, resulting in uncertainty that can discourage lending, reduce access to affordable credit and prevent banks from securitizing or selling their loans. To facilitate broader clarity on the issue, ABA asked the OCC to consider collaborating with other banking agencies to develop an approach that establishes minimum expectations for bank/nonbank partnerships, provides robust consumer protections, prevents predatory lending and appropriately accounts for safety and soundness and financial stability considerations.