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The OCC finalized its rule clarifying that when banks sell or assign a loan, interest permissible prior to the transfer continues to be permissible afterward.
“The rule supports the orderly function of markets and promotes the availability of credit by answering the legal uncertainty created by the ‘Madden’ decision,” Acting Comptroller of the Currency Brian P. Brooks said.” Such certainty allows secondary markets to work efficiently and to serve their essential role in the business of banking and helping banks access liquidity and alternative funding, improve financial performance ratios, and meet customer needs.”
The ICBA-supported rule addresses confusion from the Madden v. Midland Funding case. In that case, the Second Circuit ruled that when a loan has been sold or assigned to another party, state usury laws where the purchaser or assignee of the debt reside apply to the transaction.