September 22, 2021

Volume XI, Number 265

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Court Terminates "Rent-a-Bank" Claim

Mr. Sims is a retired veteran living on a fixed income in California.  Last year, he " "responded to online marketing" on a website maintained by OppLoans, a Delaware limited liability company with an Illinois address.  Mr. Sims entered into a loan agreement for a $1,500 loan at 160% annual rate of interest.   The loan agreement preamble stated "The words 'Lender' 'We' and 'us' mean FinWise Bank, an FDIC-insured bank located in Utah, or any of its direct or indirect assignees."   Apparently unhappy with the arrangement, Mr. Sims filed an action challenging the arrangement as being, among other things, a "rent-a-bank" scheme designed to evade the California Financing Law.

The CFL prohibits anyone from engaging in the business of finance lender or broker unless licensed by the Department of Financial Protection & Innovation, except when an exception applies.  Cal. Fin. Code § 22100(a).  U.S. District Court Judge Phyllis J. Hamilton dismissed Mr. Sims' lawsuit with prejudice.  With respect to the CFL, Judge Hamilton pointed out that Section 22050(a) provides:

"This division [California Financial Code §§ 22000-22780.1] does not apply to any person doing business under any law of any state . . . relating to banks . . ."

Finding that there is no question that FinWise is a bank, Judge Hamilton found that ". . . California Financial Code § 22050(a) exempts the loan agreement from any condition set forth in California Financial Code §§ 22000-22780.  Sims v. Opportunity Fin., LLC, 2021 U.S. Dist. LEXIS 71360, 2021 WL 1391565.

© 2010-2021 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XI, Number 153
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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