New report outlines how misguided state actions on True Lender are disrupting secondary markets and calls for federal clarification to preserve liquidity and credit access

Washington, D.C. (February 17, 2026) – The American Fintech Council (AFC), the largest industry association representing both responsible fintech companies and innovative banks, released a new white paper examining how misguided state legislative and enforcement actions are disrupting secondary markets in consumer credit. The paper, entitled Regulatory Hurdles to Properly Functioning Secondary Markets in Consumer Credit and Policy Solutions to Resolve Them, explains and concludes that uncertainty surrounding state licensing mandates, true lender laws, and litigation over DIDMCA opt-outs is weakening long-established federal banking principles and creating new risks for lenders, investors, and consumers.

“Consumer lending and secondary market investment can only function when there is clarity and consistency in the rules that govern banks and investors," said Phil Goldfeder, CEO of the American Fintech Council. "Fragmented state laws and uncertain interpretations threaten both access to credit for everyday borrowers and the stability of the broader banking system. Congress and regulators must act to reaffirm long-established federal principles so that banks can continue lending and investors can confidently participate in secondary markets."

In the white paper, AFC outlines how state legislatures and regulators are harming the very consumers they are attempting to protect by introducing laws and regulatory actions that limit access to credit, create significant risks for secondary market investors, and reduce market liquidity. These measures include, enacting true lender or predominant economic interest laws that seek to recharacterize bank-originated loans, advancing expansive interpretations of DIDMCA opt-outs, and efforts to impose lender licensing requirements on passive loan purchasers that fragment national standards. AFC warns that this patchwork approach discourages investment, reduces the value of banking charters, and creates systemic uncertainty that can constrain liquidity and, over time, limit access to consumer credit.

The report further emphasizes that the strength of consumer lending depends on predictable rules for both banks and the secondary market. Capital providers, including pension funds, endowments, and private equity investors, rely on a stable regulatory framework to evaluate and price risk before committing funds. Sudden or unclear changes to state or federal regulations can disrupt that risk calculus, limiting the availability of credit and disproportionately affecting borrowers with lower incomes. Such disruptions also pose broader risks to the banking system by creating uncertainty around the enforceability of loans and the ability of depository institutions to continue making loans and participating in secondary market activity.

"Inconsistent state rules are impinging upon innovative banks’ activities and creating real uncertainty for secondary market investors, putting consumer lending at risk," said Ian P. Moloney, Chief Policy Officer at the American Fintech Council. "A clear, predictable federal framework is essential to maintain liquidity, manage risk, and ensure consumers can access credit. Federal banking regulators and the Congress must act to ensure this federal framework is effectively implemented."

“Banks have long originated and sold loans, and the stability of the financial system depends on the certainty afforded to those transactions,” said Robert Savoie, Partner with Womble Bond Dickinson’s Consumer Financial Services Compliance Team and Fintech Practice Co-Leader. “Pension funds, university endowments, and other institutions routinely purchase bank-originated loans. Allowing regulators to retroactively invalidate entire loan portfolios based on subjective tests—despite clear federal authorization for banks to make and sell those loans—creates structural risk for a system that relies on secondary markets to fund ongoing lending.”

AFC has long advocated for congressional and regulatory action to reaffirm core federal banking principles that have historically governed loan origination and sale. In line with AFC's policy priorities and the perspectives discussed in the white paper, AFC last week stood with partners in supporting the American Lending Fairness Act of 2026. Introduced by Sen. Bernie Moreno (R-OH) and Rep. Warren Davidson (R-OH), the legislation ensures a strong and clear national lending framework, and rate parity between community and nationally chartered banks under the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA). Legislation would clarify that DIDMCA opt-outs apply only to depository institutions located within the opting-out state, preserving a uniform federal framework and ensuring stability for both lenders and secondary market investors.

The white paper recommends going even further to reinforce consistent interpretations of federal preemption standards, counter ad hoc state true lender or predominant economic interest laws, and define the limits of state licensing authority over passive secondary market participants.  AFC is actively working with Congressional leaders to reintroduce the Modernizing Credit Opportunities Act, which would establish that a bank is the “true lender” in any loan assignment arrangement with a third-party service provider.

A standards-based organization, the American Fintech Council (AFC) is the largest and most diverse trade association representing financial technology (fintech) companies and innovative banks. On behalf of over 150 member companies and partners, AFC promotes a transparent, inclusive, and customer-centric financial system by supporting responsible innovation in financial services and encouraging sound public policy. AFC members foster competition in consumer finance and pioneer products to better serve underserved consumer segments and geographies.

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