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OCC Proposes "True Lender" Rule: Four Things To Know

On July 20, 2020, the Office of the Comptroller of the Currency (OCC) released a proposed rule intended to establish a bright-line test to identify the “true lender” in lending partnerships between national banks and federal savings associations, and third parties. Uncertainty in this area has caused confusion because the identity of the lender determines which state’s interest rate limits apply to a loan: if the bank is the lender, then the law of the bank’s home state applies, and other state interest rate limitations are preempted. When paired with the OCC’s recently issued Madden-fix final regulation, the proposal, if finalized, would bring certainty to lending relationships that have been fraught with uncertainty for a number of years. Comments on the proposed rule are due September 3, 2020.

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