FDIC Rule Aims to Bolster Fintech Innovation

Yesterday, after the Federal Deposit Insurance Corporation (FDIC) approved a final rule clarifying that the valid interest rate for a loan is determined when the loan is made, Online Lenders Alliance CEO Mary Jackson issued the following statement:

“The FDIC’s rule, which codifies that the valid interest rate for a loan is determined when the loan is made, is a major step forward and resolves a longstanding issue that has caused uncertainty and confusion throughout the lending industry. It also furthers the goal of promoting banks’ ability to partner with non-bank financial technology firms, which leads to more, better, and safer options for consumers to choose from when seeking financial solutions. With many consumers now needing such financial options due to the COVID-19 pandemic, today’s rule is particularly important.

“During the COVID-19 pandemic, OLA members have offered various forms of assistance to consumers. Now, more than ever, OLA takes seriously the responsibility of lending to non-prime borrowers. Despite the economic uncertainty, stricter underwriting standards, and decreased demand, our members have helped consumers make ends meet. Online lenders have also joined many other businesses in helping existing loan customers get through these troubling times. Our lenders have done this is through direct assistance or flexible options, including loan forgiveness, loan forbearance, frozen interest payments, the ability to skip or defer payments, extended payment plans, waived fees, and halted collections. Industry innovation continues with improved products that offer financial freedom and a longer term and do not add to the cycle of debt and help consumers build their credit.

“In 2018, the Department of the Treasury issued a report which identified regulatory improvements to better support nonbank financial institutions, embrace fintech, and promote innovation. That report underscored the need for comprehensive research on the true cost of providing credit and proposed ways to streamline and modernize the regulatory environment. This action helps to achieve those goals.

“OLA will continue its advocacy efforts, working with federal regulators and Congress, to ensure that the issues raised by “Valid-When-Made” and “True Lender” are addressed in a way that is consistent with safe and sound lending practices. This, in turn, will help these partnerships meet the growing demand for innovative financial products and services.”

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