After reviewing the legal foundation for federal preemption of state law limits on interest, we discuss the final OCC/FDIC “Madden fix” rules, the “true lender” issue, potential Congressional or litigation challenges to OCC/FDIC “Madden fix” and “true lender” rules, and recent developments in litigation involving Madden or “true lender” challenges to bank/nonbank partnerships
Usury
OCC issues proposed “true lender” rule
Less than two months after issuing its final “Madden fix” rule, the OCC has now issued a proposed rule to address when a national bank or federal savings association should be considered the “true lender” in the context of a third party relationship. Comments on the proposal, which was published in today’s Federal …
Update on recent non-COVID-19-related consumer financial services legal developments
By Barbara S. Mishkin on
Posted in CFPB Exams, Debt Collection NPRM, Fair Lending, FDIC, FTC, OCC, Payday Lending, Regulatory and Enforcement, Usury
The topics we discuss are: implications of the SCOTUS Seila Law decision on CFPB rules, past consent orders, ongoing enforcement, and the Texas lawsuit challenging the CFPB payday loan rule; DOJ/FTC auto dealer fair lending actions, status of disparate impact, and Google targeted advertising changes; the CFPB’s new advisory opinion program; timing of CFPB debt…
FDIC issues “Madden fix” rule addressing state bank loan interest rates after assignment
By Glen P. Trudel & James Kim on
The FDIC has issued its widely anticipated final rule resolving the uncertainty caused by the Second Circuit’s Madden v. Midland Funding decision. Madden held that a non-bank entity that purchased charged-off loans from a national bank could not charge the same rate of interest on the loans as the national bank was able to charge…
Attorney General for District of Columbia Files “True Lender” Complaint Against Elevate Bank Program
By Jason M. Cover on
The Attorney General for the District of Columbia, Karl A. Racine, (the “AG”) has filed a complaint against Elevate Credit, Inc. (“Elevate”) in the Superior Court of the District of Columbia alleging violations of the D.C. Consumer Protection Procedures Act including a “true lender” attack related to Elevate’s “Rise” and “Elastic” products offered through bank-model…
Colorado state court rules federal interest rate preemption for state bank loans does not extend to non-bank assignees; Ballard Spahr to hold June 19 webinar
By Jeremy T. Rosenblum on
Posted in Regulatory and Enforcement, Usury
A Colorado state district court has ruled that a non-bank assignee of loans made by a state bank cannot charge the same interest rate that the state bank assignor can charge under Section 27(a) of the Federal Deposit Insurance Act (12 U.S.C. § 1831d(a)).
The ruling in Martha Fulford, Administrator, Uniform Consumer Credit Code v. …
OCC adopts final rule to resolve uncertainty created by Madden
By Jeremy T. Rosenblum on
On Brian Brooks’ first day as Acting Comptroller of the Currency, the OCC issued a final rule intended to resolve the legal uncertainty created by the Second Circuit’s decision in Madden v. Midland Funding. In that decision, the Second Circuit held that a nonbank that purchased charged-off loans from a national bank could not…
This week’s podcast: A discussion of the Veterans and Consumers Fair Credit Act with Bill Himpler, CEO of the American Financial Services Association
By Barbara S. Mishkin on
Posted in Regulatory and Enforcement, Usury
The Veterans and Consumers Fair Credit Act, which has been introduced in the House (H.R. 5050) and Senate (S. 2833), would impose a 36% national usury limit on most forms of consumer credit. Bill Himpler responds to claims that the rate limit will not reduce credit access for creditworthy consumers and discusses relevant studies, the…
CFPB, joined by South Carolina Dept. of Consumer Affairs and Arkansas AG, files lawsuit targeting service providers to pension advance products structured as purchases
By Alan S. Kaplinsky & James Kim on
The CFPB filed a complaint in a South Carolina federal district court against Upstate Law Group LLC. and two of its individual owners and managers that alleges the defendants violated the Consumer Financial Protection Act’s UDAAP prohibition in connection with the brokering of pension advance products structured as purchases by engaging in unfair and deceptive…
Virginia House of Delegates passes bill to establish 36% rate cap for “short-term” and other loans
By Alan S. Kaplinsky on
Posted in Regulatory and Enforcement, Usury
On January 31, 2020, by a vote of 65 to 33, the Virginia House of Delegates passed a bill that would establish a 36% rate cap on certain consumer loans. Since Democrats also hold a majority in the Virginia Senate, the Senate is expected to also pass the bill.
The bill amends Virginia’s general…