News Release 2020-71 | May 29, 2020
OCC Issues Rule to Clarify Permissible Interest on Transferred Loans
WASHINGTON, D.C.—The Office of the Comptroller of the Currency (OCC) today finalized a rule to clarify that when a national bank or savings association sells, assigns, or otherwise transfers a loan, interest permissible before the transfer continues to be permissible after the transfer.
Loan transfers help support the orderly function of markets and credit by providing liquidity and alternative funding sources and allowing banks to manage concentrations, improve financial performance ratios, and more efficiently meet customer needs. Recent developments, including a decision from the U.S. Court of Appeals for the Second Circuit (Madden v. Midland Funding, LLC), have created legal uncertainty regarding the effect of a transfer on a loan’s permissible interest rate. This final rule addresses this legal uncertainty by clarifying and reaffirming the long-standing understanding that a bank may transfer a loan without affecting the permissible interest term.
The rule applies to all national banks and state and federal savings associations and will take effect 60 days after publication in the Federal Register.
- Federal Register Notice (PDF)