Banking Agencies Seeking to Make “Valid When Made” Valid for Fintech

16 June 2020
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Key takeaways:
  • On June 2, 2020, the Office of Comptroller of the Currency (the “OCC”) published a final rule intended to provide certainty and support to national banks and their nonbank Fintech and other counterparties (“Fintech”) by clarifying that interest rates that are permissible for a national bank before transfer continue to be permissible after the transfer of the loan to the Fintech (commonly known as the “valid when made doctrine”). The FDIC has issued a substantially similar NPR for state banks that has not yet been finalized.
  • The courts, however, supported by state bank regulators, have raised concerns about the valid when made doctrine and the relationship between banks and Fintech more generally, focusing on the concern of evasion of state usury laws that protect their citizenry.
  • The Acting Comptroller of the Currency also has stated a related but distinct rule clarifying the “true lender” in this area is forthcoming. Given the size of this symbiotic relationship between bank loan sellers and Fintech purchasers, the outcome of this debate is very important to the continued evolution of banking and Fintech.