Comment Letter In Opposition to the OCC's Proposed 'Valid-When-Made' Rule

17 Pages Posted: 24 Jan 2020

See all articles by Arthur E. Wilmarth

Arthur E. Wilmarth

George Washington University Law School

Date Written: January 1, 2020

Abstract

This comment letter responds to a proposed rule issued by the Office of the Comptroller of the Currency (OCC), which would “codify” an alleged federal common-law “principle” known as “valid-when-made.” The proposed rule would amend two of the OCC’s regulations – 12 C.F.R. 7.4001 and 12 C.F.R. 160.110 – by providing that “interest on a loan that is permissible” for a national bank or a federal savings association, under 12 U.S.C. 85 or 12 U.S.C. 1463(g)(1), “shall not be affected by the sale, assignment, or other transfer of the loan.” 84 Fed. Reg. 64229, 64230-31 (Nov. 21, 2019). Thus, the OCC’s proposed rule seeks to expand the scope of federal preemption of state usury laws beyond national banks and federal thrifts to reach purchasers, assignees, and transferees of their loans.

The comment letter maintains that, for the following three reasons, the proposed rule exceeds the OCC’s authority and is contrary to the public interest:

(1) The proposed rule does not comply with the procedural and substantive requirements of 12 U.S.C. 25b, which governs rules and orders issued by the OCC that seek to preempt state consumer financial laws.

(2) The proposed rule would unlawfully expand the preemptive scope of 12 U.S.C. 85 and 1463(g)(1) beyond the limits established by Congress, without congressional authorization and in contravention of applicable court decisions.

(3) The proposed rule is contrary to the public interest because it would encourage predatory high-cost lending and other abusive practices that would inflict very serious injuries on consumers.

The comment letter therefore contends that the OCC should withdraw the proposed rule, and the OCC should not issue any other rule or order that would attempt to expand the preemptive scope of 12 U.S.C. 85 and 1463(g) to reach purchasers, assignees, and transferees of loans made by national banks and federal thrifts.

Keywords: Dodd-Frank Act, Erie doctrine, federal common law, federal savings associations, national banks, Office of the Comptroller of the Currency, preemption, state consumer financial laws, state usury laws, valid-when-made

JEL Classification: G20, G21, G23, G28, G50, G51, K20, K23, N20

Suggested Citation

Wilmarth, Arthur E., Comment Letter In Opposition to the OCC's Proposed 'Valid-When-Made' Rule (January 1, 2020). GWU Legal Studies Research Paper No. 2020-03, GWU Law School Public Law Research Paper No. 2020-03, Available at SSRN: https://ssrn.com/abstract=3523939 or http://dx.doi.org/10.2139/ssrn.3523939

Arthur E. Wilmarth (Contact Author)

George Washington University Law School ( email )

2000 H Street, N.W.
Washington, DC 20052
United States

HOME PAGE: http://https://www.law.gwu.edu/arthur-e-wilmarth-jr

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