Maine’s Governor, Janet Mills, recently signed S.P. 205/L.D. 522, which amended the Consumer Credit Code to protect consumers from predatory and fraudulent lending practices.  In particular, the amendments include an anti-evasion provision under which purported bank agents or service providers are deemed “lenders” for the purposes of statute.  The amendment contains the following key provisions:

  • Covered entities “may not engage in any device, subterfuge or pretense to evade the requirements of this Article, including, but not limited to…making, offering, assisting, or arranging a debtor to obtain a loan with a greater rate of interest, consideration or charge than is permitted by this Article through any method.”
  • Loans that violate these provisions are “void and uncollectible as to any principal, fee, interest or charge.”
  • A person qualifies as a lender if it:
    • holds, acquires or maintains, directly or indirectly, the predominant economic interest in the loan;
    • markets, brokers, arranges or facilitates the loan and holds the right, requirement or first right of refusal to purchase the loan or a receivable or interest in the loan; or
    • the totality of the circumstances indicate that the person is the lender and the transaction is structured to evade the requirements of this Article.
  • The circumstances that would weigh in favor of an entity being deemed the lender include, without limitation, when the entity:
    • indemnifies, insures or protects an exempt entity for any costs or risks related to the loan
    • predominately designs, controls or operates the loan program, or
    • purports to act as an agent or service provider for an exempt entity while acting directly as a lender in other states.
  • Lenders who violate these provisions may not furnish information concerning a debt associated with the violation to a consumer reporting agency, nor may it refer the associated debt to a debt collector.


Continue Reading Maine Enacts “True Lender” Legislation, Amends Consumer Credit Code to Include Anti-Evasion Provisions

On June 24, the U.S. House of Representatives passed S.J. Res. 15 by a vote of 218-208 to repeal the Office of the Comptroller of the Currency’s (OCC) “True Lender” rule under the Congressional Review Act (CRA).  The OCC published the rule last year to establish a “simple, bright-line test” to determine when a national bank or federal savings association is the true lender. Under the rule, a bank is the true lender and makes a loan if, as of the date of origination, it (i) is named as the lender in the loan agreement or (ii) funds the loan.  Further, the final rule amended the initial proposed rule and added that if, as of the date of origination, one bank is named as the lender in the loan agreement and another bank funds that loan, the bank that is named as the lender in the loan agreement is deemed to have made the loan.  The U.S. Senate passed S.J. Res. 15 last month by vote of 52-47 to invoke the CRA and provide for congressional disapproval and invalidation of the final rule. The repeal now heads to President Biden who is expected to sign it.

Continue Reading House Votes to Repeal OCC True Lender Rule