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 the settlement, the fintech is required to pay $625,000 in restitution, request deletion of tradelines on credit reports for loans reported to credit bureaus, and cease doing business in the state. Continue Reading Massachusetts AG Forces Fintech from State as Part of “True Lender” Settlement

On March 25, Washington State became the latest in a growing list of jurisdictions to introduce a “true lender” law with the passing of bill SB 6025. The legislation, similar to laws in other states would characterize a person as the “lender” of a loan if the person makes a loan in excess of the state’s rate cap and if the person:Continue Reading Washington State Passes New “True Lender” Legislation

On March 25, a coalition of trade groups filed suit in the United States District Court for the District of Colorado, challenging a Colorado law which would have opted the state Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (“DIDMCA”), a federal law enacted to create competitive equality between state-chartered banks and national banks. The law, set to take effect on July 1, 2024, would have subject out-of-state lenders to the state’s rate cap. Continue Reading Lenders Sue to Block Colorado’s Interest Rate ‘Opt-Out’ Law

On January 29, a Missouri-based bank and its Kansas-based fintech loan servicer filed a joint motion to dismiss a purported class action filed against them alleging violations of the Georgia Installment Loan Act (GILA) and state RICO law, arising out of a consumer installment loan. Continue Reading Bank Partnership Moves to Dismiss Class Action Asserting Violations of Georgia Rate Cap Law

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 respect to loans made in the District of Columbia, and would add “anti-evasion” and territorial application provisions to the D.C. Official Code (we discussed similar DIDMCA opt-out legislation in Colorado in a blog post here). Continue Reading Washington D.C. Introduced Rate Exportation Opt-Out and “Anti-Evasion” Bill

On October 9, Florida introduced SB 146, which amends the Florida Consumer Finance Act (CFA), and joins other states that have passed laws characterizing certain nonbanks as the “true lender” of loans made through a bank partnership and treats all payments incident to the loan as interest, even if voluntary.Continue Reading Florida Introduces “True Lender” Legislation

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 bank partner at interest rates above California’s interest rate cap (generally 36% for loans less than $10,000) (we previously discussed this case here and here).Continue Reading California Court Denies DFPI’s Motion for Preliminary Injunction Against Fintech

Earlier this month, the Colorado legislature voted to approve HB23-1229, which would opt the State out of Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (“DIDMCA”), a federal law enacted to create competitive equality between state-chartered banks and national banks. Section 521 gives federally insured banks, state credit unions, and state savings institutions the ability to export the interest permitted under their home state laws to borrowers in other states notwithstanding any interest limitations in the borrower’s state.Continue Reading Colorado Approves DIDMCA Opt-Out, Raising Concerns for Consumer Credit Access

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 a state-chartered bank at rates above the maximum allowed under Texas law. The plaintiff alleged that the partnership amounted to a “rent-a-bank” scheme designed to evade state law such that financial technology company, rather than its bank partner, was the “true lender” on the loans. In dismissing the lawsuit, the district court entered an order accepting and adopting the magistrate judge’s report and recommendation, finding the arbitration clause in the plaintiff’s note and disclosure statement (the “Note”) enforceable and recommended that the complaint be dismissed with prejudice. The district court also compelled arbitration of the plaintiffs’ claims.Continue Reading FinTech Prevails in Texas “True Lender” Challenge

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 subject to and also violated the Californian Financing Laws (CFL) by making loans in excess of the CFL 36% rate cap and that the FinTech violated the California Consumer Financial Protection Law (CCFPL) by offering and collecting on loans with rates exceeding the rate cap.  The cross-complaint was filed in response to a complaint filed by the Fintech company in March to prevent the DFPI from applying California usury law to loans made through its partnership with a state-chartered bank located in Utah (we discussed this complaint in a previous blog post here).
Continue Reading California Strikes Back: Filing Cross-Complaint Alleging FinTech is “True Lender,” Seeks $100M Penalty