febrero 20 2020

What Laws Apply? Madden, True Lender and Product Recharacterization Challenges


Collaborations between banks and non-banks are facing increased regulatory scrutiny and litigation due to a deceptively simple question—what laws apply to the program?

For example, even though a combination of preemption and express exemptions renders most usury and licensing laws inapplicable to bank lending, private plaintiffs and regulators have tried to apply state laws to program participants and secondary market purchasers in Madden and “true lender” cases.

The same question is becoming increasingly relevant to providers of innovative financial products framed as non-credit advances or other “non-loan” products. Regulators are questioning whether payroll advance, merchant cash advance and sales finance programs should be viewed as lending programs subject to state licensing and usury limits. Such recharacterization would—like Madden and “true lender” claims—significantly change the regulatory requirements.

Join members of Mayer Brown’s Consumer Financial Services practice as they discuss recent legal and regulatory developments important to secondary market participants engaged in financing, purchasing or investing in consumer and small business credit, including:

  • Regulatory inquiries and challenges to the characterization of payroll advances, merchant cash advances and sales finance programs, including inquiries and rulings by California DBO and New York DFS.
  • Madden litigation against major credit card securitization programs, including recent developments in Petersen.
  • “Madden Fix” regulations proposed by OCC and FDIC and their potential implications for secondary market purchasers.
  • “True Lender” litigation updates.

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