Lend Me Your Interest Rates: Rent-a-Bank, Fintech, and True Lenders

Reeves Singleton, University of Minnesota Law SchoolFollow

Abstract

The rise of fintech has bolstered so-called rent-a-bank lending, a scheme through which online lenders partner with national banks in order to take advantage of the banks’ ability to “export” high interest rates to states with strict usury laws. This framework allows lenders to more freely target financially vulnerable populations with high-cost loans. Courts currently tend to consider three often conflicting doctrines to assess the legality of such loans. This Note first reviews these three strands of analysis: (1) the valid-when-made doctrine, which is the least protective of consumers and upholds a loan’s initial legality regardless of transfer; (2) the Madden rule, which instead bars non-bank entities from using the right of national banks to circumvent states’ interest rate limits, but which may also simply encourage closer and more insidious collaboration between banks and lenders; and (3) the true lender doctrine, which focuses on the party bearing the economic risk and control of the loan in determining if the federal interest rate preemption for banks can apply. This Note ultimately proposes a reconfigured true lender doctrine that prioritizes the borrower’s perspective. The proposed analysis looks toward who a reasonable borrower would believe is the true lender based on the lender’s outward presentation (e.g., advertising, customer service). This approach is designed to remedy the deficiencies of the current controlling doctrines. It seeks to suppress interest rate exportation by treating the entity that appears to be the lender (usually the fintech) as the legal lender, thus subjecting it to state usury laws. Further, it aims to eliminate opacity, forcing banks to openly attach their brand to high-interest loans if they wish to use their federal preemption power to profit from high-interest loans. By making the consumer experience the central test, this proposal offers a flexible and customer-oriented framework with which to combat predatory rent-a-bank schemes.

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DOI

https://doi.org/10.24926/25730037.736

Recommended Citation

Reeves Singleton, Lend Me Your Interest Rates: Rent-a-Bank, Fintech, and True Lenders, 44 L. & Inequality 55 (2026).
Available at: https://scholarship.law.umn.edu/lawineq/vol44/iss2/3