OCC Proposes Rule to Clarify “Valid When Made” Doctrine

WASHINGTON—The Office of the Comptroller of the Currency (OCC) is soliciting comments on a proposed rule 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 U.S. Court of Appeals for the Second Circuit (Madden v. Midland Funding, LLC).

The proposed rule would apply to all national banks and state and federal savings associations. Comments will be accepted for 60 days after publication in the Federal Register.  The Federal Deposit Insurance Corporation is also issuing a proposal that would address this issue.