On October 23, the Washington Department of Financial Institutions (DFI) filed a new notice of proposed rulemaking implementing the Predatory Loan Prevention Act (PLPA). The PLPA added anti-evasion provisions including predominant economic interest and totality of the circumstances tests for determining when an agent or service provider of an exempt entity is deemed the lender under the Consumer Loan Act (CLA). The proposed regulation follows DFI’s withdrawal of its earlier proposed rulemaking on the same subject. The proposal would amend the CLA regulations to clarify those provisions and require a license if either test is triggered and a loan exceeds the interest rates permitted for a CLA licensee (i.e., 25% per year).

Predominant economic interest. The proposed regulation identifies a multi-prong approach for determining if an entity holds the predominant economic interest in a loan. The test considers whether the person: (1) places its own money at risk at any time during the loan transaction; or (2) bears the benefits or risks of the loan; or (3) advertises, arranges or facilitates the loan and either (i) holds the right, requirement or right of first refusal to purchase the loan or other forms of participation in the loan or (ii) purchases, retains, or otherwise obtains more than 50% of the economic or financial interest in any loan. As drafted, the proposed test could be construed as applying to scenarios where the entity does not have a majority ownership interest in the loan.

Totality of the circumstances. The proposed regulation also sets forth a totality of the circumstances “true lender” test with multiple prongs. This test includes consideration of whether the entity directly or indirectly: (1) designs, controls or operates the loan program; (2) acts as a lender in one jurisdiction while acting as an agent or service provider for an exempt entity like a bank in another jurisdiction; (3) indemnifies, insures or protects an exempt entity against loan-related costs or risks; (4) identifies oneself as the lender in advertising or otherwise or failing to clearly and conspicuously disclose the exempt lender in all materials and disclosures; or (5) providing the exempt entity with funds to make the loan.

The proposed regulation seems particularly targeted at bank–fintech partnerships. Written comments are due December 15, 2026, and DFI will hold a public hearing that day at 11 a.m. We are closely monitoring the progress of the proposed regulation.