Federal District Court Upholds OCC, FDIC’s ‘Valid-When-Made’ Rules

A federal district court on Tuesday upheld the OCC’s and FDIC’s “valid-when-made” rules in separate rulings.  The agencies’ rules had affirmed that permissible interest on a loan made by a national or state-chartered bank or federal thrift remains valid when the loan is transferred or sold.  After the OCC and FDIC issued separate rules in 2020, several state attorneys general challenged both rules in court.

The agencies’ so-called “Madden fix” rules—which the American Bankers Association had long urged—responded to a Second Circuit Court of Appeals ruling in Madden v. Midland Funding, which held that a nonbank buyer of a loan issued by a national bank could not export the originated interest rate into another state.

OCC Acting Comptroller Michael Hsu welcomed the district court’s ruling on the OCC’s rule, but cautioned that the “legal certainty” provided by the valid-when-made rule “should be used to the benefit of consumers and not be abused.” Hsu also reiterated that “predatory lending has no place in the federal banking system” and that the OCC is committed to ensuring “banks are not used as a vehicle for ‘rent-a-charter’ arrangements.”