Legal Seminar, Denver, CO

True Lender Doctrine: Form Over Substance • A few true lender type cases have focused on the form, rather than the substance of the bank-nonbank lending arrangement. • Hudson v. ACE Cash Express , Inc., 2002 U.S. Dist. LEXIS 11226 (S.D. Ind. May 30, 2002) – Usury claims preempted even when the state-chartered bank played an "insignificant" role in the loan that had been designed by the non-bank "for the sole purpose of circumventing Indiana usury law. • Sawyer v. Bill Me Later , Inc., 23 F. Supp. 3d 1359 (D. Utah 2014) – the court found that where the bank essentially rented out its charter (in a similar "rent-a-bank" scheme to the one alleged here), the state law claims were preempted

• Beechum et al. v. Navient Solutions, Inc. et al. , No 15-cv-8239-JGB-KKx (C.D. Cal. Sept. 20, 2016)

For Discussion Purposes Only

True Lender Doctrine: Relevant Factors

• Underwriting criteria • Consumer facing/marketing materials • Loan documentation • Named party to the loan agreements • Funder of the loans • Owner of the funding accounts • Length of holding period prior to sale • Receipt of interest during holding period

Control

Structure

• Indemnification of the bank • Guarantee of obligations to the bank • Compliance requirements imposed on the nonbank

Loss Exposure

For Discussion Purposes Only