[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 1642 Introduced in Senate (IS)]
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115th CONGRESS
1st Session
S. 1642
To amend the Revised Statutes, the Home Owners' Loan Act, the Federal
Credit Union Act, and the Federal Deposit Insurance Act to require the
rate of interest on certain loans remain unchanged after transfer of
the loan, and for other purposes.
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IN THE SENATE OF THE UNITED STATES
July 27, 2017
Mr. Warner (for himself, Mr. Toomey, Mr. Peters, and Mr. Daines)
introduced the following bill; which was read twice and referred to the
Committee on Banking, Housing, and Urban Affairs
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A BILL
To amend the Revised Statutes, the Home Owners' Loan Act, the Federal
Credit Union Act, and the Federal Deposit Insurance Act to require the
rate of interest on certain loans remain unchanged after transfer of
the loan, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Protecting Consumers' Access to
Credit Act of 2017''.
SEC. 2. FINDINGS.
Congress finds that--
(1) the contractual doctrine of valid-when-made provides,
when applied to lending agreements, that a loan that is valid
at inception cannot become usurious upon the subsequent sale or
transfer of the loan to another person;
(2) this important and longstanding principle derives from
the common law and its application has been a cornerstone of
United States banking law for nearly 200 years, as provided in
the case of Nichols v. Fearson, 32 U.S. (7 Pet.) 103, 106
(1833), in which the Supreme Court of the United States
famously declared: ``Yet the rule of law is everywhere
acknowledged, that a contract free from usury in its inception,
shall not be invalidated by any subsequent usurious
transactions upon it.'';
(3) in 2016, the Solicitor General of the United States, in
consultation with all Federal banking regulators, filed an
amicus brief in the case of Midland Funding, LLC v. Madden, 136
S. Ct. 2505 (2016) (mem.), denying cert. to 786 F.3d 246, (2d
Cir. 2015), that described the United States Court of Appeals
for the Second Circuit in that case as ``incorrect'' with an
``analysis reflect[ing] a misunderstanding'' of section 85 of
the National Bank Act and precedent of the Supreme Court of the
United States because the analysis contradicted the contractual
doctrine of valid-when-made;
(4) the valid-when-made doctrine, by bringing certainty to
the legal treatment of all valid loans that are transferred,
greatly enhances liquidity in the credit markets by widening
the potential pool of loan buyers and reducing the cost of
credit to borrowers at the time of origination;
(5) a joint academic study by professors at Stanford,
Fordham, and Columbia Universities concluded that the Madden v.
Midland decision has already disproportionately affected low-
and moderate-income individuals in the United States with lower
FICO scores; and
(6) if the valid-when-made doctrine is not reaffirmed soon
by Congress, the lack of access to safe and affordable
financial services will force the households in the United
States with the fewest resources to seek financial products
that are nontransparent, fail to inform consumers about the
terms of credit available, and do not comply with State and
Federal laws, including regulations.
SEC. 3. RATE OF INTEREST AFTER TRANSFER OF LOAN.
(a) Amendment to the Revised Statutes.--Section 5197 of the Revised
Statutes (12 U.S.C. 85) is amended by adding at the end the following:
``A loan that is valid when made as to its maximum rate of interest in
accordance with this section shall remain valid with respect to such
rate regardless of whether the loan is subsequently sold, assigned, or
otherwise transferred to a third party, and may be enforced by such
third party notwithstanding any State law to the contrary.''.
(b) Amendment to the Home Owners' Loan Act.--Section 4(g) of the
Home Owners' Loan Act (12 U.S.C. 1463(g)) is amended by adding at the
end the following:
``(3) A loan that is valid when made as to its maximum rate of
interest in accordance with this subsection shall remain valid with
respect to such rate regardless of whether the loan is subsequently
sold, assigned, or otherwise transferred to a third party, and may be
enforced by such third party notwithstanding any State law to the
contrary.''.
(c) Amendment to the Federal Credit Union Act.--Section 205(g) of
the Federal Credit Union Act (12 U.S.C. 1785(g)) is amended by adding
at the end the following:
``(3) A loan that is valid when made as to its maximum rate of
interest in accordance with this subsection shall remain valid with
respect to such rate regardless of whether the loan is subsequently
sold, assigned, or otherwise transferred to a third party, and may be
enforced by such third party notwithstanding any State law to the
contrary.''.
(d) Amendment to the Federal Deposit Insurance Act.--Section 27 of
the Federal Deposit Insurance Act (12 U.S.C. 1831d) is amended by
adding at the end the following:
``(c) A loan that is valid when made as to its maximum rate of
interest in accordance with this section shall remain valid with
respect to such rate regardless of whether the loan is subsequently
sold, assigned, or otherwise transferred to a third party, and may be
enforced by such third party notwithstanding any State law to the
contrary.''.
SEC. 4. RULE OF CONSTRUCTION.
Nothing in this Act may be construed as limiting the authority or
jurisdiction of the Office of the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, the Board of Governors of the
Federal Reserve System, the Bureau of Consumer Financial Protection, or
the National Credit Union Administration.
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