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Madden Put to Rest? – OCC Finalizes Rule Reaffirming “Valid When Made” Doctrine

Posted in Regulatory Developments

The Office of the Comptroller of the Currency (OCC) finalized a rule on May 29, 2020, that reaffirms the “valid when made” doctrine applicable to loans originated by a national bank. According to Acting Comptroller of the Currency Brian Brooks, the final rule “clarif[ies] that a bank may transfer a loan without affecting the legally permissible interest term[]” and “supports the orderly function of markets and promotes the availability of credit by answering the legal uncertainty created by the ‘Madden’ decision.” The OCC believes that the legal uncertainty caused by the decision of the U.S. Court of Appeals for the Second Circuit in Madden v. Midland Funding, LLC “may disrupt banks’ ability to serve consumers, businesses and the broader economy efficiently and effectively.”

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