On July 20, the Office of the Comptroller of the Currency (OCC), the primary federal regulator for national banks and federal savings banks (each, a Bank), issued a proposed rule regarding when a Bank is the “true lender” in connection with a loan (Proposed Rule).

As set forth in the Proposed Rule, the OCC has proposed that a Bank makes a loan whenever it, as of the date of origination, (1) is named as the lender in the loan agreement; or (2) funds the loan. The OCC stated that, when a Bank is named as the lender in a loan agreement, the “OCC views this imprimatur as conclusive evidence that the bank is exercising its authority to make loans . . . and has elected to subject itself to the panoply of applicable Federal laws and regulations (including but not limited to consumer protection laws) governing lending.” The OCC further stated that if a bank funds a loan as of the date of origination, the “OCC concludes that it has a predominant economic interest in the loan and, therefore, has made the loan — regardless of whether it is the named lender in the loan agreement as of the date of origination.”

The OCC stated that this rule is necessary to both permit Banks to exercise their full authority to make and sell loans, and to ensure the availability of credit in the market. As the OCC noted in the Proposed Rule, “there has been increasing uncertainty about the legal framework that applies to the loans made as part of these [third party] relationships. This uncertainty may discourage banks and third parties from entering into relationships, limit competition, and chill the innovation that results from these partnerships — all of which may restrict access to affordable credit.”

The Proposed Rule is a “complement” to the OCC’s final rule related to “valid when made,” which provides that the interest rate in a loan agreement originated by a Bank is not affected by a transfer or assignment and is enforceable against the borrower by any subsequent assignee. The “valid when made” rule is effective on August 1, 2020.

Comments on the Proposed Rule are due September 3, 2020.

The Proposed Rule is available here.