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Financial Services Law Insights and Observations

House Republicans push OCC for Madden regulatory fix

Federal Issues U.S. House House Financial Services Committee Madden Valid When Made Fintech Usury State Issues OCC

Federal Issues

On September 19, 26 Republican members of the House Financial Services Committee wrote to the OCC, urging the agency to update its interpretation of the definition of “interest” under the National Bank Act (NBA) to limit the impact of the U.S. Court of Appeals for the Second Circuit’s 2015 decision in Madden v. Midland Funding, LLC (covered by a Buckley Special Alert here). The letter argues that Madden deviated from the longstanding valid-when-made doctrine—which provides that if a contract that is valid (not usurious) when it was made, it cannot be rendered usurious by later acts, including assignment—and has “caused significant uncertainty and disruption in many types of lending programs.” Specifically, the letter asserts that the decision “threatens bank-fintech partnerships” that may provide better access to capital and financing to small business and consumers. The letter acknowledges the recently filed amicus brief in the U.S. District Court for the District of Colorado by the OCC and the FDIC, which criticized the Madden decision for disregarding the valid-when-made doctrine and the “stand-in-the-shoes-rule” of contract law (previously covered by InfoBytes here), and requests that the OCC prioritize rulemaking to address the issue.

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