'Madden Fix' Rules Withstand A Key Test: What Happens Next

More than six years after it was decided, the practical consequences of the US Court of Appeals for the Second Circuit's Madden v. Midland Funding, LLC decision continue to diminish. The decision—which held that, under some circumstances, a loan originated by a bank became subject to state usury laws once transferred to a non-bank—implicitly rejected the long-standing doctrine of "valid when made" and once threatened to upend the lending industry. It has been repeatedly narrowed and rarely expanded.

One of the most significant steps in the post-Madden efforts to provide nationwide certainty to market participants was a pair of 2020 regulations issued by the Office of the Comptroller of the Currency (OCC), which regulates national banks, and the Federal Deposit Insurance Corporation (FDIC), which regulates state-chartered banks. The rules codified pre-Madden judicial precedent and "valid when made" principles to expressly state that a loan properly originated by a