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MONTH-IN-BRIEF (Oct 2020)

Banking Law

OCC Issues True Lender Rule

By Catherine M. Brennan and Latif Zaman, Hudson Cook, LLP

The Office of the Comptroller of the Currency has finalized its rule that determines when a national bank or federal savings association is the "true lender" on a loan made in the context of a partnership between a bank and a third party. The OCC's final rule specifies that a bank makes a loan and is the true lender if, as of the date of origination, it (1) is named as the lender in the loan agreement or (2) funds the loan.

The rule 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. The rule also 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.  

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