News & Analysis as of

True Lender Financial Services Industry FinTech

Sheppard Mullin Richter & Hampton LLP

Massachusetts AG Forces Fintech from State as Part of “True Lender” Settlement

On May 21, the Massachusetts Attorney General entered into an Assurance of Discontinuance (“AOD”) with a California-based fintech alleging that it was the “true lender” of its consumer installment loans. Under the terms of...more

Ballard Spahr LLP

Ninth Circuit: Arbitration clause prevails in “true lender” challenge against OppFi

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In a recent unpublished memorandum opinion in a putative class action, Carpenter et al. v. Opportunity Financial, LLC, the U.S. Court of Appeals for the Ninth Circuit upheld an arbitration clause in an agreement governing...more

Ballard Spahr LLP

Recent FDIC Consent Orders Reflect Ongoing Scrutiny of Bank Relationships with Fintechs

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In February 2024, the Federal Deposit Insurance Corporation (FDIC) entered into consent orders with two banks who partner with fintechs to offer “banking as a service” (BaaS) related to safety and soundness concerns relating...more

McGlinchey Stafford

True Lender and Rate Exportation: Reviewing the Major 2023 Legislation

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In recent years, several state legislatures have enacted consumer credit laws designed to regulate FinTech companies operating through partnerships with depository institutions, or more generally to limit the interest rates...more

Ballard Spahr LLP

Recent FDIC consent orders show increased regulation scrutiny of bank relationships with fintech partners

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In February 2024, the Federal Deposit Insurance Corporation (FDIC) entered into consent orders with two banks who partner with fintechs to offer “banking as a service” (BaaS) related to safety and soundness, compliance with...more

McGlinchey Stafford

Missouri and Washington Introduce True Lender Bills

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Missouri and Washington introduced new true lender bills intended to regulate companies, largely FinTechs, that operate under bank partnership models with federally insured depository institutions. Under these models, the...more

Goodwin

Pick Up the Indemnification Stick for Your True Lender Bundle

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In this edition of Fintech Flash, we discuss ways to think about true lender risk in fintech–bank lending partnerships, with a particular focus on how indemnification provisions in program agreements weigh in the balance of...more

Ballard Spahr LLP

“True Lender Act” Bill Proposed in Maryland

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Maryland has joined the ranks of states considering legislation that would codify elements of “true lender” theory in an effort to impose federally preempted state licensing requirements and rate caps on loans to Maryland...more

Troutman Pepper

Washington D.C. Introduces Legislation Attacking Fintech-Bank Partnership Lending by Opting Out of DIDMCA and Codifying a “True...

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Late last month, Councilmember Kenyan R. McDuffie introduced B 25-0609, entitled the Protecting Affordable Loans Amendment Act of 2023, that proposes to opt the District of Columbia out of sections 521-523 of the Depository...more

Sheppard Mullin Richter & Hampton LLP

Washington D.C. Introduced Rate Exportation Opt-Out and “Anti-Evasion” Bill

On November 30, Washington D.C. introduced District of Columbia Council Bill B 25-0609, which would opt the state out of Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (“DIDMCA”) with...more

Sheppard Mullin Richter & Hampton LLP

California Court Denies DFPI’s Motion for Preliminary Injunction Against Fintech

On October 30, the Superior Court of California County of Los Angeles denied the DFPI’s motion for a preliminary injunction to force a Chicago-based fintech company to stop facilitating loans to California borrowers from its...more

Ballard Spahr LLP

California Court Denies DFPI’s Motion for Preliminary Injunction Against OppFi

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In a lengthy (65-page) order, the California Superior Court in Los Angeles has issued an extremely important decision upholding the legitimacy of bank-model online lending by denying a motion for preliminary injunction filed...more

Ballard Spahr LLP

OppFi Hat Trick: Third Federal Court Upholds Arbitration Clause

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Earlier this month, in Fama v. Opportunity Financial LLC, a Magistrate Judge of the federal district court for the Western District of Washington held that the arbitration provision in OppFi’s installment loan agreement is...more

Ballard Spahr LLP

“True lender” class actions against OppFi filed in multiple states

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In January 2023, a federal district court in Texas dismissed Michael v. Opportunity Financial, LLC, a putative class action filed in June 2022 claiming that fintech Opportunity Financial, LLC (OppFi), not its out-of-state,...more

Ballard Spahr LLP

Fintech settles allegations that payment of tips and donations was a hidden interest charge

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A fintech peer-to-peer lender has entered into separate consent orders with California, Washington D.C., and Connecticut relating to its practice of requesting tips and donations in connection with the loans offered through...more

Goodwin

Fintech-Bank Lending Partnerships: 8 Key Issues

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Partnerships between financial technology companies (fintechs) and banks have revolutionized the financial services landscape. The convergence of technology and banking has resulted in financial products and services being...more

Sheppard Mullin Richter & Hampton LLP

FinTech Prevails in Texas “True Lender” Challenge

On January 11, 2023, a Texas federal court dismissed a class action lawsuit against a leading financial technology company alleging it violated Texas usury laws by charging interest on loans it made through a partnership with...more

Sheppard Mullin Richter & Hampton LLP

California Strikes Back: Filing Cross-Complaint Alleging FinTech is “True Lender,” Seeks $100M Penalty

On April 8, the California Department of Financial Protection and Innovation (DFPI) filed a cross-complaint against a Chicago-based FinTech company alleging that as the “true lender” of consumer installment loans, it is...more

Mayer Brown

Marketplace Lender’s Lawsuit Against California DFPI Challenges “True Lender” Recharacterization

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Marketplace lender Opportunity Financial, LLC (“OppFi”) has gone on the offensive against the California Department of Financial Protection and Innovation (“DFPI”) to protect its bank partnership program against challenge on...more

Hudson Cook, LLP

Court Upholds "Valid When Made" Rules, But "True Lender" Risk Lives On

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In a victory for fintechs and the banks that partner with them, the U.S. District Court for the Northern District of California recently turned back two challenges by a consortium of state attorneys general to the "valid when...more

Sheppard Mullin Richter & Hampton LLP

OCC Prevails in Challenge to “Valid When Made” Rule

On February 8, the U.S. District Court for the Northern District of California ruled against three states – California, Illinois, and New York – challenging the OCC’s rule on the “valid when made” doctrine. In 2020, the OCC...more

Eversheds Sutherland (US) LLP

Focus on Fintech: Auto Title Lender LoanMart Agrees to End Bank Partnership Lending Program Following “True Lender” Inquiry by...

On December 14, 2021, Wheels Financial, LLC (d/b/a LoanMart) entered into a consent order with the California Department of Financial Products and Innovation (DFPI) in which the company agreed to end its lending partnership...more

Perkins Coie

Fintech Legal Report - July 2021

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President Biden Issues an Executive Order on Competition with Implications for Financial Institutions - On July 9, 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy. The...more

Spilman Thomas & Battle, PLLC

Promissory Notes - Banking & Finance Insights, Issue 5

Welcome to our fifth issue of Promissory Notes -- our e-newsletter focused on banking and finance insights. We hope you are enjoying our monthly publication. Banks to Companies: No More Deposits, Please - "Some banks,...more

Morgan Lewis - All Things FinReg

True Lender Rule Invalidated

Congress has enacted and President Joseph Biden has signed a joint resolution of disapproval under the Congressional Review Act (CRA) of the Office of the Comptroller of the Currency’s (OCC’s) “true lender” rule, which, as we...more

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