Under the long-established “when-made” doctrine, a loan that was not subject to any federal usury law at the time it was made is not subsequently realised, even if it is later sold or assigned to another party. The doctrine has long been applied by courts and used in aftermarket sales, but its application to a non-bank buyer was rejected by the Second Circuit in 2015 Madden v Midland Funding, LLC.
In 2020, the OCC and FDIC issued their applicable “When Made” rules and confirmed that the rule applies to loans made by federal and state savings banks, as well as by state banks under the FDIC agency.
In the most recent court challenge on February 8, the US District Court for the Northern District of California dismissed California, Illinois and New York’s challenges to the OCC and FDIC rules. On February 9, OCC Acting Comptroller Michael Hsu reiterated that the OCC rule still applies. However, he noted that the OCC is committed to ensuring that the rule is not abused, stating:
This legal certainty should be used to the benefit of consumers and not abused. I want to reiterate that predatory lending has no place in the federal banking system. The OCC advocates strict oversight that expands financial inclusion and ensures banks are not used as vehicles for rent-a-charter arrangements.