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August 03, 2020

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July 31, 2020

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

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.

Copyright 2020 K & L GatesNational Law Review, Volume IX, Number 331


About this Author

Rebecca Laird, Financial Institutions Attorney, KL Gates Law Firm
Of Counsel

Ms. Laird practices in the area of financial institutions law.  Her clients are commercial banks, trust companies, savings banks, savings associations and their holding companies.  Her practice includes:

  • representation of financial institutions before state and Federal bank and securities regulatory agencies, including:  the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Securities and Exchange Commission;
  • counseling clients on mergers and acquisitions, interstate branching, trust operations and...
Anthony R.G. Nolan, KL Gates, fixed income securities lawyer, structured finance attorney
Practice Area Leader

Anthony Nolan is a finance partner in the New York office and is a Practice Area Leader for the firm's global Finance practice. Mr. Nolan has a domestic and international practice that emphasizes lending transactions, fixed income securities, structured finance, structured products and derivatives. He often works at the intersection of finance and investment management, including trading and regulation of swaps and security-based swaps, loan trading, securities lending and repo as well as traditional borrowing and leverage transactions. 

Mr. Nolan has significant experience in (i) securities laws affecting asset-backed securities, corporate debt securities and security-based swaps, (ii) commodity futures laws impacting swaps and commodity pool participants and (iii) banking laws that regulate the derivatives and securities activities of depository institutions and their affiliates including under the Volcker Rule. 

Daniel Cohen, KL Gates Law Firm, Washington DC, Finance Law Attorney

Daniel Cohen is a first year associate in the Washington, D.C. office.

Admitted only in Virginia / Not Admitted in D.C.
Supervised by Soyong Cho, member of D.C. Bar