Senate Democrats criticize OCC and FDIC fintech proposals

Federal Issues Agency Rule-Making & Guidance FDIC OCC Fintech Valid When Made Madden Usury Payday Lending Consumer Lending Interest Rate Preemption

On November 21, six Democratic Senators wrote to OCC Comptroller Joseph Otting and FDIC Chairman Jelena Williams to strongly oppose recent proposed rules by the agencies (see OCC notice here and FDIC notice here). As previously covered by a Buckley Special Alert, the OCC and FDIC proposed rules reassert the “valid-when-made doctrine,” which states that loan interest that is permissible when the loan is made to a bank remains permissible after the loan is transferred to a nonbank. In the letter, the Senators suggest that the proposed rules enable non-bank lenders to avoid state interest rate limits. According to the letter, the proposed rules would encourage “payday and other non-bank lenders to launder their loans through banks so that they can charge whatever interest rate federally-regulated banks may charge.” Additionally, the letter urges both agencies to consider their past declarations against “rent-a-bank” schemes, and contends that the agencies should not attempt to address Madden v. Midland Funding, LLC, which rejected the valid-when-made doctrine, through rulemaking, but should instead leave such lawmaking to Congress.