On Thursday, September 3, SFA submitted a letter to the Office of the Comptroller of the Currency (OCC) in response to its proposal concerning when national banks or federal savings associations (a “Bank”) make loans and are the “true lender”. SFA supports the proposal as an important corollary to the recently finalized ‘valid when made’ rule in order to ensure the enforceability of the interest rate and other terms of loan agreements when a Bank finances or sell the loans to non-bank entities. Absent the proposed “true lender” rule, SFA believes that the certainty created by the ‘valid when made’ rule could be undermined by a growing number of claims that a Bank is not the true lender. This uncertainty and subjectivity present significant concerns for loan purchasers and fixed income investors, who face the continued possibility that a court could determine that they are the true lender or that they have financed or purchased loans where the interest rate is subsequently found to be unenforceable. Therefore, SFA supports the OCC’s efforts to provide much needed clarity while requesting that it institute appropriate safeguards to ensure fair and responsible lending to consumers and protection against predatory, high cost lending.
Please contact someone on the SFA Team, if you have any questions about the letter.