Insights

State attorneys general from several states, including New York, California, and Illinois recently challenged the Office of the Comptroller of the Currency’s (OCC) valid-when-made rule in a California federal court. On Tuesday, February 8, U.S. District Judge Jeffrey S. White sided with the federal agency and rejected the states’ efforts to block the OCC’s rule concluding that the states’ arguments were “unpersuasive.” The OCC and Federal Deposit Insurance Corporation (FDIC) both issued valid-when-made rules in 2020 asserting the rules were necessary to address legal uncertainty regarding interest-rate transferability in the banking industry citing the Second Circuit’s 2015 ruling in Madden v. Midland Funding, LLC, which held that a purchaser of a loan originated by a national bank could not rely on the banks’ federal preemption of state usury laws. The industry-friendly rule affirmed that permissible interest on a loan made by a national bank “shall not be affected” when the loan is transferred, sold, or assigned. Judge White also granted summary judgment in the FDIC's favor on Tuesday, according to court records.

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