Fintech Adoption Poised For Growth In US Despite Lag

Michael Nonaka is quoted in Law360 regarding Madden v. Midland Funding, a case that called into question the validity of interest rates on bank-originated debt that is later transferred to nonbank partners, such as fintech firms. The decision largely rejected the "valid-when-made" doctrine stating that a loan's interest rate remains legal as long as it was legal when the loan was made, regardless of who ends up eventually holding the loan.

Mr. Nonaka says, "I think that Madden and the true-lender cases create a lot of uncertainty for both banks and fintech companies on how to develop a lending platform in a way where they have some confidence about the interest rate they can charge and whether there's licensing required. And I think that is having a chilling effect on these types of platforms." He adds, “There's a lot of legal work in developing the agreements" between fintech companies and banks. But I think if you were to have stability in the framework for true lender and the Madden valid-when-made, that would go a long way.”