OCC and FDIC Propose Rules to Confirm “Valid-When-Made” Doctrine

By Rebecca Laird, Anthony Nolan and Daniel Cohen

Over the last two days, the Office of the Comptroller of the Currency (“OCC”) and the Federal Deposit Insurance Corporation (“FDIC”) (together, the “Agencies”) each issued a proposed rule (collectively, the “Proposed Rules”) that would codify the Agencies’ position that the interest on a loan originated on a bank, if permissible when the loan was made, will continue to be a permissible and an enforceable term of the loan following the sale, assignment, or transfer of the loan. This is known as the “valid-when-made” doctrine.


The Proposed Rules would effectively overrule the Second Circuit Court of Appeals’ decision in the case of Madden v. Midland Funding and cases in other judicial circuits that have followed it. [1] In that case, decided in 2015, the Second Circuit made news in the marketplace lending industry — and the market for bank-originated debt more broadly — when it held that a nonbank purchaser of bank-originated credit card debt was subject to New York State’s usury laws.

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