вЂњTrue lenderвЂќ uncertainty remains
The agencies explicitly do not address the validity of certain bank-fintech partnership models that remain subject to вЂњtrue lenderвЂќ challenges and regulatory scrutiny while the proposed rules seek to remediate the legal uncertainty resulting from the Madden decision. 3 The lender that isвЂњtrue issue has arisen within the context of particular lending arrangements between a bank and a non-bank entity, which experts have actually referred to as вЂњrent-a-charterвЂќ or вЂњrent-a-bankвЂќ schemes. These experts argue that the вЂњrent-a-charterвЂќ modelвЂ”in which the non-bank entity typically markets the mortgage, makes the credit choice and directs its bank-partner to originate and temporarily hold such loan before buying it through the bankвЂ”improperly permits the non-bank entity to profit through the broad security associated with exportation doctrine regarding the loanвЂ™s rate of interest also to claim its very own exemption from relevant state loan provider certification and usury limits by perhaps perhaps maybe not acting due to the fact loan provider. These experts genuinely believe that the non-bank entities should be thought about the вЂњtrue lenderвЂќ into the deals as the bank just isn’t adequately involved in the financing system and will not get the advantages and take the potential risks anticipated of a lender that is true. Nevertheless, such a structural view of bank-fintech partnerships could be extremely simplistic. Used, the type of these partnerships is nuanced and their structures is extremely adjustable for a case-by-case foundation.
The foundation associated with the вЂњtrue loan providerвЂќ challenge could be traced back once again to the Georgia legislatureвЂ™s efforts in 2004 to avoid specific payday lenders from circumventing stateвЂ™s usury laws by stepping into financing programs with out-of-state banking institutions.