The Repeal of the Controversial True Lender Rule

We have written about the “True Lender Rule” many, many, many times. The rule was the US Office of the Comptroller of the Currency’s (OCC) attempt to provide legal certainty to national banks and federal savings associations during lending transactions under partnerships with fintechs and other non-bank lenders. According to the rule, a bank was deemed to be the true lender when it either funded the loan or was listed as the lender on the loan documents, even if the bank later assigned the loan to a non-bank. 

Non-banks could thus use the national banks’ loan interest rates without being subject to a given state’s usury laws. This is because federal law governs national banks and enables them to use rates of their state’s location when lending to consumers in other states, even though the rates may be usurious in the consumer’s home state.

Industry observers welcomed the rule and the certainty it created for investors and lenders about applicable interest rates after assignment to another entity. But the rule proved controversial as consumer groups and attorneys general from several states, among others, worked to overturn it—claiming that it enabled predatory lending and undermined state consumer protection laws. 

In late June, the House of Representatives joined the Senate to pass a joint resolution to nullify the rule under the Congressional Review Act. President Joe Biden signed the resolution, repealing the rule and essentially barring OCC from issuing similar rules without congressional action. Congress’s resolution caused state attorneys general to dismiss their lawsuits—essentially ending the dispute for the foreseeable future. 

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