The Office of the Comptroller of the Currency (OCC) published a final rule on October 27 that adopts a “bright line test” for determining when a national bank or federal savings bank (bank) is the “true lender” in connection with a loan originated pursuant to a third-party partnership (Final Rule). Under the Final Rule, a Bank makes a loan when it, as of the date of origination, (1) is named as the lender in the loan agreement; or (2) funds the loan. In cases where one bank is named as the lender in the loan agreement and another bank funds the loan, the bank named as the lender in the loan agreement is deemed to have “made” the loan.

In issuing the Final Rule, the OCC noted that its publication was intended to provide the “legal certainty necessary for banks to partner confidently with other market participants and meet the credit needs of their customers.” In acknowledging concerns raised by certain commenters regarding claims that the rule permits “inappropriate” rent-a-charter or rent-a-bank schemes, the Final Rule states that the OCC’s position is that such arrangements have “absolutely no place in the federal banking system” and that the OCC’s “robust supervisory framework effectively targets predatory lending, achieving the same goal as a more complex true lender test.”

The OCC also noted in its commentary that the Final Rule “operates together with the OCC’s recently finalized ‘Madden-fix’ rulemaking. When a bank makes a loan pursuant to the test [set forth in the Final Rule], the bank may subsequently sell, assign, or otherwise transfer the loan without affecting the permissible interest term, which is determined by reference to state law.”

In total, more than 4000 comments were submitted to the OCC in connection with the Final Rule’s adoption.

The final rule will be effective 60 days after publication in the Federal Register.

More information is available here.