United States: OCC Proposes Clarification Of "Valid When Made" In Response To Madden Case

The United States Office of the Comptroller of the Currency (OCC) has proposed a rule¹ to clarify that when a national bank or savings association sells, assigns or otherwise transfers a loan, interest permissible prior to the transfer continues to be permissible following the transfer.

This proposal will address confusion about the effect of a transfer on a loan's valid interest rate, including confusion resulting from a recent decision from the US Court of Appeals for the Second Circuit (Madden v. Midland Funding, LLC)².

The proposed rule would apply to all national banks and state and federal savings associations.

The OCC is soliciting comments on the proposed rule. Comments will be accepted for 60 days after publication in the Federal Register. The Federal Deposit Insurance Corporation is also issuing a proposal that will address this issue.

Footnotes

[1] The proposed rule was published in the Federal Register on Thursday, November 21, 2019, and as a result, comments thereon are due by January 21, 2020.

[2] Madden v. Midland Funding, LLC, 786 F.3d 246 (2nd Cir. 2015).

Originally published November 18 2019

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