From the States' press release:
Attorneys general from New York, California and several other states sued on Tuesday to block the Office of the Comptroller of the Currency's recently finalized "true lender" rule, a measure that the states argue is unlawful and stands to facilitate predatory lending.
In a complaint filed in New York federal court, the coalition of state attorneys general says the OCC had overreached by issuing the "unprecedented and ill-conceived" rule, which adopted a two-prong test for determining who the "true lender" of a loan is, a status that in turn controls what interest rate limits and other laws might apply to the transaction.
Under the OCC's test, which was finalized in May, a loan offered through a partnership between a federally chartered bank and nonbank would be considered to have been made by the bank, so long as the bank either is named as the lender in the loan's documentation or funds the loan at origination.
That's significant because the bank in such an arrangement may not be bound by the local interest rate caps that would otherwise apply to the nonbank, so the rule effectively gives legal cover to nonbanks that would use bank partners essentially as fronts to get around these caps and make high-cost loans, according to the state AGs.
The complaint is here. The full press release is here.
