FDIC Publishes Final Rule Regarding the “Valid When Made” Doctrine
On June 25, the Federal Deposit Insurance Corporation (FIDC) published its final rule with respect to whether a loan made by a state-chartered bank is “valid when made” pursuant to the preemptive authority in Section 27 of the Federal Deposit Insurance Act (Final Rule).
The Final Rule confirms the longstanding banking law doctrine that a loan made by a state-chartered bank that is valid when made may be enforced by any subsequent assignor or transferee in accordance with its stated terms. As stated by the FIDC, a “State bank’s statutory authority under section 27 to make loans at particular rates necessarily includes the power to assign the loans at those rates.”
The FDIC further stated that the Final Rule did not address circumstances when a non-bank might be the “true lender,” although it did note that consideration of this issue in a separate rulemaking was “warranted.”
The Final Rule will be effective 30 days after its publication in the Federal Register. The Office of the Comptroller issued a similar rule related to loans made by national banks and federal savings banks on May 29, 2020, which is effective on August 1, 2020.
The Final Rule is available here.