On May 29, 2020, the Office of the Comptroller of the Currency
(OCC) issued a long-awaited final rule to clarify and underscore the
'valid when made' principle in which the interest rates
permissible before a bank transfers a loan continues to be
permissible after the transfer to a non-bank.
Generally, under the National Bank Act (NBA), national banks
chartered by the OCC have the power to make contracts, lend money,
and all incidental powers necessary to carry out the business of
banking. Regarding interest, the NBA requires a national bank to
comply with the interest rate caps of the state where the national
bank is located. Under the longstanding 'valid when made'
rule, upon the transfer or assignment of a loan, the terms of the
debt, including the interest rate and any preemption protection
under the NBA, remained intact and valid through maturity no matter
who the purchaser was or where the purchaser was located.
