On November 18, 2019, the Department of the Treasury’s Office of the Comptroller of the Currency (“OCC”) issued a notice of proposed rulemaking (the “OCC Proposed Rules”) that would codify the OCC’s position that when a national bank “sells, assigns, or otherwise transfers a loan, interest permissible prior to the transfer continues to be permissible following the transfer.” The Federal Deposit Insurance Corporation (the “FDIC”) issued a parallel notice of proposed rulemaking the following day (the “FDIC Proposed Rules” and, together with the OCC Proposed Rules, the “Proposed Rules”) that similarly set forth the FDIC’s position that whether interest on a loan is permissible under section 27 of the Federal Deposit Insurance Act should be determined at the time the loan is made, and should not be affected by subsequent events such as “the sale, assignment, or other transfer of the loan.” The Proposed Rules seek to reaffirm well-established federal law, Congressional intent and basic contract law principles that dictate that a loan’s interest rate remains legal if it was legal at the time of origination of the loan, regardless of the legal status of the assignee as a bank or non-bank. The OCC Proposed Rules would apply to national banks and savings associations, while the FDIC Proposed Rules would apply to state chartered banks and insured branches of foreign banks (collectively, “banks”). The Proposed Rules would not apply to loans originated by non-bank lenders.
December 2, 2019
