January 26, 2021

Volume XI, Number 26


January 25, 2021

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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.

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 178



About this Author

Christina J. Grigorian, Banking legal Specialist, Katten Muchin Law firm
Special Counsel

Christina J. Grigorian counsels clients in all matters related to banks, bank holding companies, and state and foreign-licensed consumer and commercial lenders. Ms. Grigorian provides advice to the firm’s financial institution clients concerning structural and operational issues, including legislative developments impacting such operations, and has worked with companies and individuals in the establishment of de novo entities, including national banks, federal savings banks and state-chartered institutions, as well as state-licensed lenders. She has also counseled clients with respect to...