Would-be loan providers have traditionally attempted to evade state usury legislation utilizing alleged rent-a-bank schemes: An out-of-state bank, which need not adhere to rate of interest caps into the payday lender’s state, will act as a front side when it comes to business that is really behind a high-interest loan it couldn’t legally make it self. In return for “renting” itself away in this way—expending little effort and using small risk within the process—the bank gets a tiny cut for the action.
Such schemes had been typical about 20 years back but had been mostly controlled away during the early 2000s.
But, states NCLC’s Saunders, they’ve been building a comeback in past times couple of years, partly because of not enough enforcement. Her company has documented rent-a-bank schemes involving at the very least six banking institutions in at the least 30 states for the reason that time frame.
To fight such schemes, regulators have actually historically invoked something called the genuine loan provider doctrine, a appropriate concept that allows courts figure out which entity may be the real loan provider predicated on facets such as for example whom did the 
advertising strive to produce the company, that is using the economic danger, and whom many appears to profit. When you look at the eyes of this legislation, the genuine loan provider must adhere to the relevant rules.
The OCC’s October ruling really discards the doctrine, declaring rather that the lender that is true this is the entity known as because the lender from the loan contract. Læs videre “Rent-a-Bank Schemes”