Determining when a bank is a “true lender” within the context of a partnership between it and a third party is the focus of a final rule issued Tuesday by the federal regulator of national banks; the rule was first proposed only this past July.
The rule is scheduled to take effect Dec. 29.
In a release, the Office of the Comptroller of the Currency (OCC) said its final rule specifies that a bank makes a loan and is the true lender if, as of the date of origination, it, first, is named as the lender in the loan agreement or, second, funds the loan.
The agency said its new regulation also specifies that if, as of the date of origination, one bank is named as the lender in the loan agreement for a loan and another bank funds that loan, the bank that is named as the lender in the loan agreement makes the loan.
Finally, the OCC said, the final rule clarifies that as the true lender of a loan, the bank retains the compliance obligations associated with the origination of that loan, “thus negating concern regarding harmful rent-a-charter arrangements.”
The agency indicated that the background for the final rule lies in “increasing legal uncertainty in banks’ lending relationships with third parties” which, it said, may discourage those two parties from partnering. The agency also said the uncertainty can limit competition and “chill the innovation that results from these partnerships,” eventually limiting access to affordable credit.
The rule was first proposed in July by the OCC with an aim, it said then, to “enable banks to fully exercise the lending authority granted to them under Federal law and allow stakeholders to reliably and consistently identify key aspects of the legal framework applicable to a loan,” the agency said.
The agency also said in July that when a bank makes a loan, “a robust Federal framework applies to ensure that banks are lending in a safe and sound manner and in compliance with applicable laws and regulations, and the OCC is the prudential regulator of the bank’s lending activities.”
The period for submitting comments on the proposal ended Sept. 3 – essentially meaning that the final rule was issued less than two months after the comment period ended, and just a bit more than four months after first proposed July 20.