b'over most consumer-facing Fintech companies, as wellnationwide access to loans with uniform interest rates as Fintech companies that provide services to suchand to operate without state lender licenses. Under the companies. The DFPI has enforcement authority overOCCs final rule, a bank making a loan is a true lender more than 50 California consumer finance laws asif, as of the date of origination, it (i) is named as the well as 20 federal consumer protection laws, and itslender in the loan agreement, or (ii) funds the loan.regulator has the power to seek rescission of contracts,The rule specifically targets inappropriaterestitution for consumers, disgorgement, injunctiverent-a-charter schemes, or arrangements in relief, and monetary penalties. This includes rulemakingwhich a bank receives a fee to rent its charter and authority over UDAAP that covers virtually every entityaccompanying legal status to a third party, by providing offering a consumer financial product or service to athat if, as of the date of origination, one bank is named California consumer. Fintech companies in particularas the lender in the loan agreement for a loan and should expect increased attention from the DFPI,another bank funds that loan, the bank that is named although rulemaking and licensing efforts may takeas the lender in the loan agreement makes the loan. some time to ramp up. The final rule became effective on December 29, 2020. Industry groups are likely to challenge the final The Madden Fixrule, the OCCs authority to issue such a rule, and the In June, the OCC and FDIC each issued a final rule inextent to which courts will apply the rule to true lender an effort to address the legal confusion regarding thedisputes. In January 2021, attorneys general from impact of the permissible interest when a bank transfersNew York, California, and several other states sued to a loan to a third party. The rules were in response toblock the true lender rule, arguing it is unlawful and uncertainty created by the Second Circuits decision instands to facilitate predatory lending. In New York v. Madden v. Midland Funding, LLC, No. 14-2131, whichOCC, No. 21-0057, the attorneys general asked the held that assignees of a national bank were not allowedcourt to invalidate the true lender rule as violating the to charge interest at the rate permitted by the assignorAdministrative Procedure Act, the law governing federal national banks state. This ruling called into questionrulemaking standards. the longstanding Valid When Made principlethat a transaction valid when made remain valid uponNY Senate Bill 5470transfer. In early June, the OCC issued a final ruleIn July, the New York Senate and Assembly passed clarifying that as a matter of Federal law, banks maySenate Bill S5470B, which adds a new Article transfer their loans without impacting the permissibility(Article 8) to the New York Financial Services Law. or enforceability of the interest term. Shortly thereafter,Article 8 imposes a number of consumer credit-like the FDIC issued its own rule adopting the Valid Whendisclosure requirements on providers of commercial Made principle.financing, including non-loan commercial financing. Additionally, S5470B authorizes the Superintendent The OCCs Final True Lender Rule of the New York DFS to issue regulations governing In October, on the heels of the Madden fix, thesuch disclosures. Although Article 8 does not apply to OCC issued its final rule regarding the true lenderfinancial institutions, it does apply to persons that solicit standard, to address the question of which entity makesand present specific offers of commercial financing on a loan when the loan is originated as part of a lendingbehalf of a third party. Fintech companies participating partnership involving a bank and a third party. Thein a bank partnership agreement should therefore OCCs final rule is thus especially relevant to Fintechbe aware of the disclosure requirements set forth in entities that provide access to loans, which often relyArticle 8. Article 8 does not require factors, merchant on partnerships with banks. When properly structured,cash providers, or Fintech companies to obtain these arrangements allow nonbank entities to providelender licenses, but does require these companies 21'