OCC Finalizes True Lender Rule Enabling Bank-Fintech Lending Partnerships

On October 30, 2020, the Office of the Comptroller of the Currency (OCC) finalized its true lender rule, a significant regulatory development for the bank-fintech lending ecosystem. The rule establishes a clear test: a national bank is the true lender of a loan if it is named as the lender in the loan agreement or if it funds the loan at origination. This determination resolves longstanding legal ambiguity that had created uncertainty for bank-fintech lending partnerships, where fintech companies originate loans through partner bank charters.

By providing a bright-line standard, the rule enables banks and non-bank fintech partners to structure lending programs with greater legal certainty. The finalization was expected to accelerate the growth of marketplace lending, BNPL, and other embedded lending products offered through bank-fintech partnerships. The rule was published in the Federal Register and represented one of the OCC's most consequential regulatory actions for the BaaS and embedded finance ecosystem.

However, the rule also attracted criticism from state regulators and consumer advocates concerned about potential regulatory arbitrage.