Will The True Lender Please Stand? – OCC Proposes "True Lender" Bright-Line Rule

On July 20, 2020, the Office of the Comptroller of the Currency (OCC) issued a notice of proposed rulemaking that would establish when national banks or federal savings associations (collectively, banks) are the "true lender" when making a loan, in the context of a partnership between the bank and a third party. Recognizing the uncertainty created by existing case law and lack of regulatory guidance, the OCC proposes that the bank will be treated as the "true lender" if, as of the date of origination, the bank is named as the lender in the loan agreement or the bank funds the loan.

Background

Banks are permitted to enter into contracts, to make loans, and to subsequently transfer the loans and assign loan contracts. Banks also are permitted to rely on third-party service providers for marketing, loan servicing, and other "non-ministerial" lending activities. Federal law does not delineate how to determine which entity is the "true lender," meaning the