NY Regulator Pushes for Clarity on True Lender

On Monday, May 22nd, a New York State financial regulator urged legislators to clarify the statutory definition of "making loans" to include a wider range of companies, according to a recent American Banker article. The issue is related to certain state regulators' views on which party – the online platform or the bank partner – is the true lender. Maria Vullo, Superintendent of the New York State Department of Financial Services said of online lenders, "They are partnering with these out-of-state banks, often a Utah bank that doesn't really have usury limits...but the online lender is really the true lender that needs to get the license, so they cannot utilize preemption provisions."

Vullo argues that the definition should be broadened "to include situations where an entity, in addition to soliciting a loan, is arranging or facilitating the funding of a loan, or ultimately purchasing or acquiring the loan." Vullo's remarks come as state regulators push back against proposed federal regulation of nonbank fintech companies. Vullo's agency and the Conference of State Bank Supervisors have filed separate lawsuits seeking to block the Office of the Comptroller of the Currency's (OCC) proposed special purpose national bank charter. "We believe the preemptive impact of that would have significant consequences for consumers and for community banks," Vullo said of the OCC's plan.

SFIG's Marketplace Lending Committee previously submitted comments to the OCC on their proposed special purpose bank charter. If you would like to join this committee, please contact Michael.Williams@sfindustry.org.

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