Valid-When-Made and True Lender Doctrines: Usury Issues With Banking Partnerships and Rent-a-Bank Lenders

A live 90-minute premium CLE video webinar with interactive Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Wednesday, November 30, 2022

1:00pm-2:30pm EST, 10:00am-11:30am PST

Early Registration Discount Deadline, Friday, November 4, 2022

or call 1-800-926-7926

The CLE webinar will analyze the valid-when-made and true lender doctrines and issues that can arise when banks and nonbanks enter partnerships to offer consumer loan products. The panel discussion will include the evolution of both issues under national banking laws, the Madden case, the 2020 OCC rules, and remaining controversies over applying these doctrines as indicated in recent case law.

Description

In today's banking environment, a non-bank partner often markets loans, processes applications, applies underwriting criteria and services, and collects loans. At the same time, a federal or state-chartered bank originates the loans. The bank can then charge consumers interest rates that exceed many states' usury laws.

States and consumer protection groups have challenged this practice. In Madden v. Midland Funding L.L.C., the Second Circuit held that loans transferred to a third-party debt collector were not entitled to the National Bank Act's preemption protections. In response to Madden, the OCC and the FDIC issued rules in 2020 confirming the principle that a bank loan that is permissible when originated is not affected by the bank's subsequent sale of the loan. Several states have challenged those rules in court.

Non-bank partnerships have also been challenged because the bank that originated the loan was not the "true lender," so the non-bank is not entitled to rely on the interest rate authority available to the bank. The OCC issued a regulation outlining when a national bank would be deemed the true lender. Congress overturned that regulation in 2021 under the Congressional Review Act. The ability of non-bank lenders to team with banks to make loans that exceed state usury limits remains subject to potential challenges.

Listen as our authoritative panel examines the current state of the valid-when-made and true lender doctrines and actions banks and their non-bank partners can take to avoid usury and related claims.

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Outline

  1. Background on valid-when-made and true lender doctrines
    1. Federal preemption of state usury laws
    2. Evolution of rent-a-bank and bank partnership arrangements
    3. Valid-when-made
    4. True lender doctrine
    5. Dodd-Frank and OCC preemption powers
  2. Madden v. Midland Funding
  3. OCC Final Rules regarding valid-when-made doctrine and true lender doctrine
  4. Application in recent case law
  5. Implications for banking partnerships going forward

Benefits

The panel will review these and other vital issues:

  • How have banks and their non-bank partners taken advantage of federal preemption of state usury laws?
  • What was the impact of the Madden case and subsequent OCC regulations on the valid-when-made doctrine?
  • To what extent has the true lender doctrine been contested by courts in recent litigation, and what has been the outcome?
  • What steps can federal and state-licensed banks take when partnering with non-banks to ensure they comply with applicable usury laws?

Faculty

Brennan, Catherine
Catherine M. Brennan

Partner
Hudson Cook

Ms. Brennan assists national and state banks, investment banks, commercial finance companies, savings associations,...  |  Read More

Additional faculty
to be announced.
Attend on November 30

Early Discount (through 11/04/22)

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Early Discount (through 11/04/22)

You may pre-order a recording to listen at your convenience. Recordings are available 48 hours after the webinar. Strafford will process CLE credit for one person on each recording. All formats include course handouts.

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