79–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 115–538 

PROTECTING CONSUMERS’ ACCESS TO CREDIT ACT OF 

2017 

JANUARY 30, 2018.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany H.R. 3299] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 3299) 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, 

having considered the same, report favorably thereon without 

amendment and recommend that the bill do pass. 

PURPOSE AND SUMMARY

Introduced on July 19, 2017 by Representative Patrick McHenry, 

H.R. 3299, the ‘‘Protecting Consumers’ Access to Credit Act of 

2017’’ clarifies several laws to ensure that bank loans that are 

valid as to their maximum rate of interest in accordance with federal law when made shall remain valid with respect to that rate 

regardless of whether a bank has subsequently sold or assigned the 

loan to a third party. 

BACKGROUND AND NEED FOR LEGISLATION

The 2015 Second Circuit Court of Appeals’ opinion in Madden v. 

Midland Funding, LLC, (786 F.3d 246 (2015)) held that while the 

National Bank Act (NBA) allowed a federally chartered bank to 

2 

charge interest under the laws of its home state on loans it makes 

nationwide, non-banks that bought those loans could not continue 

to collect that interest because non-banks are generally subject to 

the limits of the borrower’s state. In short, the Second Circuit did 

not apply the ‘‘valid when made’’ doctrine but instead held that the 

NBA did not preempt state usury laws because Midland was not 

a national bank, or a subsidiary or agent of a national bank, but 

rather was a ‘‘third party.’’ In June 2016, the U.S. Supreme Court 

declined to grant certiorari to review the Second Circuit’s decision. 

The Second Circuit’s decision has caused considerable uncertainty and risk for many types of bank lending programs, including 

‘‘bank model’’ marketplace lending where national banks originate 

loans and then transfer them to nonbank third parties. Being able 

to offer consistent terms nationwide is vital to scale the marketplace lending business, which in turn allows lenders to access 

cheaper investment capital and pass along those savings to borrowers. In addition, the Madden ruling threatens access to traditional bank credit. Selling debt to non-bank entities in the secondary loan market is a significant part of how banks hedge risk, 

preserve balance-sheet capacity and maintain liquidity in the loan 

market. Jeopardizing this common practice of selling debt could 

force banks to become more restrictive as to whom they offer credit, 

as well as increase interest rates to compensate for the lost revenue and diminished liquidity. 

The Madden decision has already created some market uncertainty and has the potential to affect all types of securitized debt 

or whole loan sales of all types, which impacts access to credit and 

risk mitigation. In the two years since the Madden decision, there 

is now a lack of uniform interpretation of banking law across the 

country. 

In an October 5, 2017, letter of support for H.R. 3299, the National Federation of Independent Business, National Small Business Association, Small Business Entrepreneurship Council, Innovative Lending Platform Association, Marketplace Lending Association, Financial Innovation Now, Financial Services Roundtable, 

Independent Community Bankers of America, American Bankers 

Association, Consumer Bankers Association, Clearing House Association, and U.S. Chamber of Commerce expressed their support for 

H.R. 3299, stating: 

[H.R. 3299] would provide greater certainty and liquidity 

in commercial credit markets and thereby have a positive 

impact on access to credit for both consumers and small 

businesses. 

The Protecting Consumers’ Access to Credit Act would 

codify the ‘‘valid-when-made’’ doctrine, a longstanding 

legal principle, reaffirmed in 2016 by the U.S. Solicitor 

General, that if a loan is valid when it is made with respect to its interest rate, then it does not become invalid 

or unenforceable when assigned to another party. This 

bedrock common law principle has been a cornerstone of 

U.S. banking law for over 100 years. It provides critical 

legal certainty necessary for the effective and efficient 

functioning of the credit markets, thereby benefiting both 

individuals and small businesses 

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. . . The bill’s reaffirmation of the ‘‘valid-when-made’’ 

principle also could serve to encourage innovative partnerships between banks and financial technology companies 

that purchase bank loans or interests in securitizations of 

such loans, further expanding access to credit for U.S. 

small businesses and consumers. 

HEARINGS

The Committee on Financial Services held a hearing examining 

matters relating to H.R. 3299 on April 26, 2017 and April 28, 2017. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on December 12, 2017 and ordered H.R. 435 to be reported favorably by 

a recorded vote of 42 yeas to 17 nays (Record vote no. FC–116), a 

quorum being present. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. The sole recorded 

vote was on a motion by Chairman Hensarling to report the bill favorably to the House without amendment. The motion was agreed 

to by a recorded vote of 42 yeas to 17 nays (Record vote no. FC– 

116), a quorum being present. 

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Insert graphic folio 5 HR538.001

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Mr. HENSARLING Chairman ./ Committee on Financial Services 

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I Mrs. MALONEY I .! 

Ms. VELAZQUEZ I .;r 

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Mr. CLAY .,J 

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'Mr. KILDEE :; i Mr. DELA~'EY ·; 

Ms. SINEMA v 

Mrs. BEATTY J 

Mr. HECK ,/ 

I Mr. VARGAS I II 

Mr. GOTTHEIMER \1 

Mr. GONZALEZ I ..; I 

Mr. CRIST .; I 

Mr. Klti JJ;;N I ./ I 
5 

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the Committee based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee states that H.R. 3299 codifies 

the legal doctrine of ‘‘valid when made,’’ a common-law contractual 

doctrine that preserves the lawful interest rate on a loan originated 

by a bank, even if the loan is sold, assigned, or transferred to a 

non-bank third party. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, January 11, 2018. 

Hon. JEB HENSARLING, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 3299, the Protecting Consumers Access to Credit Act of 2017. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Sarah Puro. 

Sincerely, 

KEITH HALL, 

Director. 

Enclosure. 

H.R. 3299—Protecting Consumers’ Access to Credit Act of 2017 

H.R. 3299 would overturn a decision of the Second Circuit Court 

of appeals and permit nonbank financial institutions to charge interest rates that exceed certain state caps if a bank makes a valid 

loan and then sells or transfers the loan to a nonbank. The bill 

would not affect the operations or actions of federal financial reguVerDate Sep 11 2014 06:37 Jan 31, 2018 Jkt 079006 PO 00000 Frm 00005 Fmt 6659 Sfmt 6602 E:\HR\OC\HR538.XXX HR538
6 

lators. As a result, CBO estimates that enacting H.R. 3299 would 

have no effect on the federal budget. 

Enacting the bill would not affect direct spending or revenues; 

therefore, pay-as-you-go procedures do not apply. CBO estimates 

that enacting H.R. 3299 would not increase net direct spending or 

on-budget deficits in any of the four consecutive 10-year periods beginning in 2028. 

H.R. 3299 would preempt state usury laws that set interest rate 

caps and that regulate the validity of loans sold, assigned, or transferred to a third party. Such loans would retain their maximum 

rate of interest as set by the loan’s originator regardless of whether 

the loan is sold, assigned, or transferred to a third party located 

in a different state. That preemption would be a mandate as defined in the Unfunded Mandates Reform Act (UMRA). CBO estimates that the preemption would impose no costs on state governments. Although it would limit the application of state laws, it 

would impose no duty on states that would result in additional 

spending. 

H.R. 3299 contains no private-sector mandates as defined in 

UMRA. 

The CBO staff contacts for this estimate are Sarah Puro (for federal costs) and Rachel Austin (for mandates). The estimate was approved by H. Samuel Papenfuss, Deputy Assistant Director for 

Budget Analysis. 

FEDERAL MANDATES STATEMENT

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995. 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that no provision 

7 

of the bill establishes or reauthorizes: (1) a program of the Federal 

Government known to be duplicative of another Federal program; 

(2) a program included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public 

Law 111–139; or (3) a program related to a program identified in 

the most recent Catalog of Federal Domestic Assistance, published 

pursuant to the Federal Program Information Act (Pub. L. No. 95– 

220, as amended by Pub. L. No. 98–169). 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, (115th Congress), the following statement is made concerning directed rulemakings: The 

Committee estimates that the bill requires no directed rulemakings 

within the meaning of such section. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section cites H.R. 3299 as the Protecting Consumers’ Access 

to Credit Act of 2017. 

Section 2. Findings 

This section restates the common law doctrine of ‘‘valid when 

made’’ as found by Congress. 

Section 3. Rate of interest after transfer of loan 

This section amends Section 5197 of the Revised Statutes (12 

U.S.C. 85), Section 4(g) of the Home Owners’ Loan Act (12 U.S.C. 

1463(g)), Section 205(g) of the Federal Credit Union Act (12 U.S.C. 

1785(g)), and Section 27 of the Federal Deposit Insurance Act (12 

U.S.C. 1831d) to codify the legal doctrine of ‘‘valid when made,’’ 

which preserves the lawful interest rate on a loan originated by a 

bank, even if the loan is sold, assigned, or transferred to a nonbank third party. 

Section 4. Rule of construction 

This section clarifies that nothing in the 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. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

and existing law in which no change is proposed is shown in 

roman): 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

8 

as reported, are shown as follows (new matter is printed in italic 

and existing law in which no change is proposed is shown in 

roman): 

REVISED STATUTES OF THE UNITED STATES 

* * * * * * * 

TITLE LXII—NATIONAL BANKS. 

* * * * * * * 

CHAPTER THREE—REGULATION OF THE 

BANKING BUSINESS. 

* * * * * * * 

SEC. 5197. Any association may take, receive, reserve, and 

charge on any loan or discount made, or upon any notes, bills of 

exchange, or other evidences of debt, interest at the rate allowed 

by the laws of the State, Territory, or District where the bank is 

located, or at a rate of 1 per centum in excess of the discount rate 

on ninety-day commercial paper in effect at the Federal reserve 

bank in the Federal reserve district where the bank is located, 

whichever may be the greater, and no more, except that where by 

the laws of any State a different rate is limited for banks organized 

under State laws, the rate so limited shall be allowed for associations organized or existing in any such State under this title. When 

no rate is fixed by the laws of the State, or Territory, or District, 

the bank may take, receive, reserve, or charge a rate not exceeding 

7 per centum, or 1 per centum in excess of the discount rate on 

ninety-day commercial paper in effect at the Federal reserve bank 

in the Federal reserve district where the bank is located, whichever 

may be the greater, and such interest may be taken in advance, 

reckoning the days for which the note, bill, or other evidence of 

debt has to run. The maximum amount of interest or discount to 

be charged at a branch of an association located outside of the 

States of the United States and the District of Columbia shall be 

at the rate allowed by the laws of the country, territory, dependency, province, dominion, insular possession, or other political subdivision where the branch is located. And the purchase, discount, 

or sale of a bona-fide bill of exchange, payable at another place 

than the place of such purchase, discount, or sale, at not more than 

the current rate of exchange for sight-drafts in addition to the interest, shall not be considered as taking or receiving a greater rate 

of interest. 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. 

* * * * * * * 

9 

HOME OWNERS’ LOAN ACT 

* * * * * * * 

SEC. 4. SUPERVISION OF SAVINGS ASSOCIATIONS. 

(a) SAVINGS ASSOCIATIONS.— (1) EXAMINATION AND SAFE AND SOUND OPERATION.— (A) FEDERAL SAVINGS ASSOCIATIONS.—The Comptroller 

shall provide for the examination and safe and sound operation of Federal savings associations. 

(B) STATE SAVINGS ASSOCIATIONS.—The Corporation 

shall provide for the examination and safe and sound operation of State savings associations. 

(2) REGULATIONS FOR SAVINGS ASSOCIATIONS.—The Comptroller may prescribe regulations with respect to savings associations, as the Comptroller determines to be appropriate to 

carry out the purposes of this Act. 

(3) SAFE AND SOUND HOUSING CREDIT TO BE ENCOURAGED.— The Comptroller and the Corporation shall exercise all powers 

granted to the Comptroller and the Corporation under this Act 

so as to encourage savings associations to provide credit for 

housing safely and soundly. 

(b) ACCOUNTING AND DISCLOSURE.— (1) IN GENERAL.—The Comptroller shall, by regulation, prescribe uniform accounting and disclosure standards for savings 

associations, to be used in determining savings associations’ 

compliance with all applicable regulations. 

(2) SPECIFIC REQUIREMENTS FOR ACCOUNTING STANDARDS.— Subject to section 5(t), the uniform accounting standards prescribed under paragraph (1) shall— 

(A) incorporate generally accepted accounting principles 

to the same degree that such principles are used to determine compliance with regulations prescribed by the Federal banking agencies; and 

(B) allow for no deviation from full compliance with such 

standards as are in effect after December 31, 1993. 

(3) AUTHORITY TO PRESCRIBE MORE STRINGENT ACCOUNTING

STANDARDS.—The Comptroller may at any time prescribe accounting standards more stringent than required under paragraph (2) if the Comptroller determines that the more stringent standards are necessary to ensure the safe and sound operation of savings associations. 

(c) STRINGENCY OF STANDARDS.—The regulations of the Comptroller and the policies of the Comptroller and the Corporation governing the safe and sound operation of savings associations, including regulations and policies governing asset classification and appraisals, shall be no less stringent than those established by the 

Comptroller for national banks. 

(d) INVESTMENT OF CERTAIN FUNDS IN ACCOUNTS OF SAVINGS ASSOCIATIONS.—The savings accounts and share accounts of savings 

associations insured by the Corporation shall be lawful investments 

and may be accepted as security for all public funds of the United 

States, fiduciary and trust funds under the authority or control of 

the United States or any officer thereof, and for the funds of all 

corporations organized under the laws of the United States (subject 

to any regulatory authority otherwise applicable), regardless of any 

10 

limitation of law upon the investment of any such funds or upon 

the acceptance of security for the investment or deposit of any of 

such funds. 

(e) PARTICIPATION BY SAVINGS ASSOCIATIONS IN LOTTERIES AND

RELATED ACTIVITIES.— (1) PARTICIPATION PROHIBITED.—No savings association 

may— 

(A) deal in lottery tickets; 

(B) deal in bets used as a means or substitute for participation in a lottery; 

(C) announce, advertise, or publicize the existence of any 

lottery; or 

(D) announce, advertise, or publicize the existence or 

identity of any participant or winner, as such, in a lottery. 

(2) USE OF FACILITIES PROHIBITED.—No savings association 

may permit— 

(A) the use of any part of any of its own offices by any 

person for any purpose forbidden to the institution under 

paragraph (1); or 

(B) direct access by the public from any of its own offices 

to any premises used by any person for any purpose forbidden to the institution under paragraph (1). 

(3) DEFINITIONS.—For purposes of this subsection— 

(A) DEAL IN.—The term ‘‘deal in’’ includes making, taking, buying, selling, redeeming, or collecting. 

(B) LOTTERY.—The term ‘‘lottery’’ includes any arrangement, other than a savings promotion raffle, under 

which— 

(i) 3 or more persons (hereafter in this subparagraph referred to as the ‘‘participants’’) advance money 

or credit to another in exchange for the possibility or 

expectation that 1 or more but not all of the participants (hereafter in this paragraph referred to as the 

‘‘winners’’) will receive by reason of those participants’ 

advances more than the amounts those participants 

have advanced; and 

(ii) the identity of the winners is determined by any 

means which includes— 

(I) a random selection; 

(II) a game, race, or contest; or 

(III) any record or tabulation of the result of 1 

or more events in which any participant has no interest except for the bearing that event has on the 

possibility that the participant may become a winner. 

(C) LOTTERY TICKET.—The term ‘‘lottery ticket’’ includes 

any right, privilege, or possibility (and any ticket, receipt, 

record, or other evidence of any such right, privilege, or 

possibility) of becoming a winner in a lottery. 

(D) SAVINGS PROMOTION RAFFLE.—The term ‘‘savings 

promotion raffle’’ means a contest in which the sole consideration required for a chance of winning designated prizes 

is obtained by the deposit of a specified amount of money 

in a savings account or other savings program, where each 

ticket or entry has an equal chance of being drawn, such 

11 

contest being subject to regulations that may from time to 

time be promulgated by the appropriate prudential regulator (as defined in section 1002 of the Consumer Financial 

Protection Act of 2010 (12 U.S.C. 5481)). 

(4) EXCEPTION FOR STATE LOTTERIES.—Paragraphs (1) and (2) 

shall not apply with respect to any savings association accepting funds from, or performing any lawful services for, any 

State operating a lottery, or any officer or employee of such a 

State who is charged with administering the lottery. 

(5) REGULATIONS.—The Comptroller shall prescribe such regulations as may be necessary to provide for enforcement of this 

subsection and to prevent any evasion of any provision of this 

subsection. 

(f) FEDERALLY RELATED MORTGAGE LOAN DISCLOSURES.—A savings association may not make a federally related mortgage loan to 

an agent, trustee, nominee, or other person acting in a fiduciary capacity without requiring that the identity of the person receiving 

the beneficial interest of such loan shall at all times be revealed 

to the savings association. At the request of the appropriate Federal banking agency, the savings association shall report to the appropriate Federal banking agency the identity of such person and 

the nature and amount of the loan. 

(g) PREEMPTION OF STATE USURY LAWS.—(1) Notwithstanding 

any State law, a savings association may charge interest on any extension of credit at a rate of not more than 1 percent in excess of 

the discount rate on 90-day commercial paper in effect at the Federal Reserve bank in the Federal Reserve district in which such 

savings association is located or at the rate allowed by the laws of 

the State in which such savings association is located, whichever 

is greater. 

(2) If the rate prescribed in paragraph (1) exceeds the rate such 

savings association would be permitted to charge in the absence of 

this subsection, the receiving or charging a greater rate of interest 

than that prescribed by paragraph (1), when knowingly done, shall 

be deemed a forfeiture of the entire interest which the extension 

of credit carries with it, or which has been agreed to be paid thereon. If such greater rate of interest has been paid, the person who 

paid it may recover, in a civil action commenced in a court of appropriate jurisdiction not later than 2 years after the date of such 

payment, an amount equal to twice the amount of the interest paid 

from the savings association taking or receiving such interest. 

(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. 

(h) FORM AND MATURITY OF SECURITIES.—No savings association 

shall— 

(1) issue securities which guarantee a definite maturity except with the specific approval of the appropriate Federal 

banking agency, or 

12 

(2) issue any securities the form of which has not been approved by the appropriate Federal banking agency. 

* * * * * * * 

FEDERAL CREDIT UNION ACT 

* * * * * * * 

TITLE II—SHARE INSURANCE 

* * * * * * * 

REQUIREMENTS GOVERNING INSURED CREDIT UNIONS

SEC. 205. (a) INSURANCE LOGO.— (1) INSURED CREDIT UNIONS.— (A) IN GENERAL.—Each insured credit union shall display at each place of business maintained by that credit 

union a sign or signs relating to the insurance of the share 

accounts of the institution, in accordance with regulations 

to be prescribed by the Board. 

(B) STATEMENT TO BE INCLUDED.—Each sign required 

under subparagraph (A) shall include a statement that insured share accounts are backed by the full faith and credit of the United States Government. 

(2) REGULATIONS.—The Board shall prescribe regulations to 

carry out this subsection, including regulations governing the 

substance of signs required by paragraph (1) and the manner 

of display or use of such signs. 

(3) PENALTIES.—For each day that an insured credit union 

continues to violate this subsection or any regulation issued 

under this subsection, it shall be subject to a penalty of not 

more than $100, which the Board may recover for its use. 

(b)(1) Except as provided in paragraph (2), no insured credit 

union shall, without the prior approval of the Board— 

(A) merge or consolidate with any noninsured credit union or 

institution; 

(B) assume liability to pay any member accounts in, or similar liabilities of, any noninsured credit union or institution; 

(C) transfer assets to any noninsured credit union or institution in consideration of the assumption of liabilities for any 

portion of the member accounts in such insured credit union; 

or 

(D) convert into a noninsured credit union or institution. 

(2) CONVERSION OF INSURED CREDIT UNIONS TO MUTUAL SAVINGS BANKS.— 

(A) IN GENERAL.—Notwithstanding paragraph (1), an insured credit union may convert to a mutual savings bank 

or savings association (if the savings association is in mutual form), as those terms are defined in section 3 of the 

Federal Deposit Insurance Act, without the prior approval 

of the Board, subject to the requirements and procedures 

set forth in the laws and regulations governing mutual 

savings banks and savings associations. 

13 

(B) CONVERSION PROPOSAL.—A proposal for a conversion 

described in subparagraph (A) shall first be approved, and 

a date set for a vote thereon by the members (either at a 

meeting to be held on that date or by written ballot to be 

filed on or before that date), by a majority of the directors 

of the insured credit union. Approval of the proposal for 

conversion shall be by the affirmative vote of a majority of 

the members of the insured credit union who vote on the 

proposal. 

(C) NOTICE OF PROPOSAL TO MEMBERS.—An insured credit union that proposes to convert to a mutual savings bank 

or savings association under subparagraph (A) shall submit notice to each of its members who is eligible to vote 

on the matter of its intent to convert— 

(i) 90 days before the date of the member vote on 

the conversion; 

(ii) 60 days before the date of the member vote on 

the conversion; and 

(iii) 30 days before the date of the member vote on 

the conversion. 

(D) NOTICE OF PROPOSAL TO BOARD.—The Board may require an insured credit union that proposes to convert to 

a mutual savings bank or savings association under subparagraph (A) to submit a notice to the Board of its intent 

to convert during the 90-day period preceding the date of 

the completion of the conversion. 

(E) INAPPLICABILITY OF ACT UPON CONVERSION.—Upon 

completion of a conversion described in subparagraph (A), 

the credit union shall no longer be subject to any of the 

provisions of this Act. 

(F) LIMIT ON COMPENSATION OF OFFICIALS.— (i) IN GENERAL.—No director or senior management 

official of an insured credit union may receive any economic benefit in connection with a conversion of the 

credit union as described in subparagraph (A), other 

than— 

(I) director fees; and 

(II) compensation and other benefits paid to directors or senior management officials of the converted institution in the ordinary course of business. 

(ii) SENIOR MANAGEMENT OFFICIAL.—For purposes of 

this subparagraph, the term ‘‘senior management official’’ means a chief executive officer, an assistant chief 

executive officer, a chief financial officer, and any 

other senior executive officer (as defined by the appropriate Federal banking agency pursuant to section 32 

(f) of the Federal Deposit Insurance Act). 

(G) CONSISTENT RULES.— (i) IN GENERAL.—Not later than 6 months after the 

date of enactment of the Credit Union Membership Access Act, the Administration shall promulgate final 

rules applicable to charter conversions described in 

this paragraph that are consistent with rules promulgated by other financial regulators, including the OfVerDate Sep 11 2014 06:37 Jan 31, 2018 Jkt 079006 PO 00000 Frm 00013 Fmt 6659 Sfmt 6601 E:\HR\OC\HR538.XXX HR538
14 

fice of the Comptroller of the Currency. The rules required by this clause shall provide that charter conversion by an insured credit union shall be subject to 

regulation that is no more or less restrictive than that 

applicable to charter conversions by other financial institutions. 

(ii) OVERSIGHT OF MEMBER VOTE.—The member vote 

concerning charter conversion under this paragraph 

shall be administered by the Administration, and shall 

be verified by the Federal or State regulatory agency 

that would have jurisdiction over the institution after 

the conversion. If either the Administration or that 

regulatory agency disapproves of the methods by 

which the member vote was taken or procedures applicable to the member vote, the member vote shall be 

taken again, as directed by the Administration or the 

agency. 

(3) Except with the prior written approval of the Board, no insured credit union shall merge or consolidate with any other insured credit union or, either directly or indirectly, acquire the assets of, or assume liability to pay any member accounts in, any 

other insured credit union. 

(c) In granting or withholding approval or consent under subsection (b) of this section, the Board shall consider— 

(1) the history, financial condition, and management policies 

of the credit union; 

(2) the adequacy of the credit union’s reserves; 

(3) the economic advisability of the transaction; 

(4) the general character and fitness of the credit union’s 

management; 

(5) the convenience and needs of the members to be served 

by the credit union; and 

(6) whether the credit union is a cooperative association organized for the purpose of promoting thrift among its members 

and creating a source of credit for provident or productive purposes. 

(d) PROHIBITION.— (1) IN GENERAL.—Except with prior written consent of the 

Board— 

(A) any person who has been convicted of any criminal 

offense involving dishonesty or a breach of trust, or has 

agreed to enter into a pretrial diversion or similar program 

in connection with a prosecution for such offense, may 

not— 

(i) become, or continue as, an institution-affiliated 

party with respect to any insured credit union; or 

(ii) otherwise participate, directly or indirectly, in 

the conduct of the affairs of any insured credit union; 

and 

(B) any insured credit union may not permit any person 

referred to in subparagraph (A) to engage in any conduct 

or continue any relationship prohibited under such subparagraph. 

(2) MINIMUM 10-YEAR PROHIBITION PERIOD FOR CERTAIN OFFENSES.— 

15 

(A) IN GENERAL.—If the offense referred to in paragraph 

(1)(A) in connection with any person referred to in such 

paragraph is— 

(i) an offense under— 

(I) section 215, 656, 657, 1005, 1006, 1007, 1008, 

1014, 1032, 1344, 1517, 1956, or 1957 of title 18, 

United States Code; or 

(II) section 1341 or 1343 of such title which affects any financial institution (as defined in section 20 of such title); or 

(ii) the offense of conspiring to commit any such offense, 

the Board may not consent to any exception to the application of paragraph (1) to such person during the 10-year period beginning on the date the conviction or the agreement 

of the person becomes final. 

(B) EXCEPTION BY ORDER OF SENTENCING COURT.— 

(i) IN GENERAL.—On motion of the Board, the court 

in which the conviction or the agreement of a person 

referred to in subparagraph (A) has been entered may 

grant an exception to the application of paragraph (1) 

to such person if granting the exception is in the interest of justice. 

(ii) PERIOD FOR FILING.—A motion may be filed 

under clause (i) at any time during the 10-year period 

described in subparagraph (A) with regard to the person on whose behalf such motion is made. 

(3) PENALTY.—Whoever knowingly violates paragraph (1) or (2) shall be fined not more than $1,000,000 for each day such 

prohibition is violated or imprisoned for not more than 5 years, 

or both. 

(e)(1) The Board shall promulgate rules establishing minimum 

standards with which each insured credit union must comply with 

respect to the installation, maintenance, and operation of security 

devices and procedures, reasonable in cost, to discourage robberies, 

burglaries, and larcenies and to assist in the identification and apprehension of persons who commit such acts. 

(2) The rules shall establish the time limits within which insured 

credit unions shall comply with the standards and shall require the 

submission of periodic reports with respect to the installation, 

maintenance, and operation of security devices and procedures. 

(3) An insured credit union which violates a rule promulgated 

pursuant to this subsection shall be subject to a civil penalty which 

shall not exceed $100 for each day of the violation. 

(f)(1) Every insured credit union is authorized to maintain, and 

make loans with respect to, share draft accounts in accordance 

with rules and regulations prescribed by the Board. Except as provided in paragraph (2), an insured credit union may pay dividends 

on share draft accounts and may permit the owners of such share 

draft accounts to make withdrawals by negotiable or transferable 

instruments or other orders for the purpose of making transfers to 

third parties. 

(2) Paragraph (1) shall apply only with respect to share draft accounts in which the entire beneficial interest is held by one or more 

individuals or members or by an organization which is operated 

16 

primarily for religious, philanthropic, charitable, educational, or 

other similar purposes and which is not operated for profit, and 

with respect to deposits of public funds by an officer, employee, or 

agent of the United States, any State, county, municipality, or political subdivision thereof, the District of Columbia, the Commonwealth of Puerto Rico, American Samoa, Guam, any territory or 

possession of the United States, or any political subdivision thereof. 

(g)(1) If the applicable rate prescribed in this subsection exceeds 

the rate an insured credit union would be permitted to charge in 

the absence of this subsection, such credit union may, notwithstanding any State constitution or statute which is hereby preempted for the purposes of this subsection, take, receive, reserve, 

and charge on any loan, interest at a rate of not more than 1 per 

centum in excess of the discount rate on ninety-day commercial 

paper in effect at the Federal Reserve bank in the Federal Reserve 

district where such insured credit union is located or at the rate 

allowed by the laws of the State, territory, or district where such 

credit union is located, whichever may be greater. 

(2) If the rate prescribed in paragraph (1) exceeds the rate such 

credit union would be permitted to charge in the absence of this 

subsection, and such State fixed rate is thereby preempted by the 

rate described in paragraph (1), the taking, receiving, reserving, or 

charging a greater rate than is allowed by paragraph (1), when 

knowingly done, shall be deemed a forfeiture of the entire interest 

which the loan carries with it, or which has been agreed to be paid 

thereon. If such greater rate of interest has been paid, the person 

who paid it may recover, in a civil action commenced in a court of 

appropriate jurisdiction not later than two years after the date of 

such payment, an amount equal to twice the amount of interest 

paid from the credit union taking or receiving such interest. 

(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. 

(h) Notwithstanding any other provision of law, the Board may 

authorize a merger or consolidation of an insured credit union 

which is insolvent or is in danger of insolvency with any other insured credit union or may authorize an insured credit union to purchase any of the assets of, or assume any of the liabilities of, any 

other insured credit union which is insolvent or in danger of insolvency if the Board is satisfied that— 

(1) an emergency requiring expeditious action exists with respect to such other insured credit union; 

(2) other alternatives are not reasonably available; and 

(3) the public interest would best be served by approval of 

such merger, consolidation, purchase, or assumption. 

(i)(1) Notwithstanding any other provision of this Act or of State 

law, the Board may authorize an institution whose deposits or accounts are insured by the Federal Deposit Insurance Corporation 

to purchase any of the assets of or assume any of the liabilities of 

an insured credit union which is insolvent or in danger of insolvency, except that prior to exercising this authority the Board must 

attempt to effect the merger or consolidation of an insured credit 

17 

union which is insolvent or in danger of insolvency with another 

insured credit union, as provided in subsection (h). 

(2) For purposes of the authority contained in paragraph (1), insured accounts of the credit union may upon consummation of the 

purchase and assumption be converted to insured deposits or other 

comparable accounts in the acquiring institution, and the Board 

and the National Credit Union Share Insurance Fund shall be absolved of any liability to the credit union’s members with respect 

to those accounts. 

(j) PRIVILEGES NOT AFFECTED BY DISCLOSURE TO BANKING AGEN- CY OR SUPERVISOR.— (1) IN GENERAL.—The submission by any person of any information to the Administration, any State credit union supervisor, or foreign banking authority for any purpose in the 

course of any supervisory or regulatory process of such Board, 

supervisor, or authority shall not be construed as waiving, destroying, or otherwise affecting any privilege such person may 

claim with respect to such information under Federal or State 

law as to any person or entity other than such Board, supervisor, or authority. 

(2) RULE OF CONSTRUCTION.—No provision of paragraph (1) 

may be construed as implying or establishing that— 

(A) any person waives any privilege applicable to information that is submitted or transferred under any circumstance to which paragraph (1) does not apply; or 

(B) any person would waive any privilege applicable to 

any information by submitting the information to the Administration, any State credit union supervisor, or foreign 

banking authority, but for this subsection. 

* * * * * * * 

FEDERAL DEPOSIT INSURANCE ACT 

* * * * * * * 

SEC. 27. (a) In order to prevent discrimination against Statechartered insured depository institutions, including insured savings 

banks, or insured branches of foreign banks with respect to interest 

rates, if the applicable rate prescribed in this subsection exceeds 

the rate such State bank or insured branch of a foreign bank would 

be permitted to charge in the absence of this subsection, such State 

bank or such insured branch of a foreign bank may, notwithstanding any State constitution or statute which is hereby preempted for the purposes of this section, take, receive, reserve, and 

charge on any loan or discount made, or upon any note, bill of exchange, or other evidence of debt, interest at a rate of not more 

than 1 per centum in excess of the discount rate on ninety-day 

commercial paper in effect at the Federal Reserve bank in the Federal Reserve district where such State bank or such insured branch 

of a foreign bank is located or at the rate allowed by the laws of 

the State, territory, or district where the bank is located, whichever 

may be greater. 

(b) If the rate prescribed in subsection (a) exceeds the rate such 

State bank or such insured branch of a foreign bank would be permitted to charge in the absence of this section, and such State fixed 

18 

rate is thereby preempted by the rate described in subsection (a), 

the taking, receiving, reserving, or charging a greater rate of interest than is allowed by subsection (a), when knowingly done, shall 

be deemed a forfeiture of the entire interest which the note, bill, 

or other evidence of debt carries with it, or which has been agreed 

to be paid thereon. If such greater rate of interest has been paid, 

the person who paid it may recover in a civil action commenced in 

a court of appropriate jurisdiction not later than two years after 

the date of such payment, an amount equal to twice the amount 

of the interest paid from such State bank or such insured branch 

of a foreign bank taking, receiving, reserving, or charging such interest. 

(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. 

* * * * * * * 

(19) 

MINORITY VIEWS 

H.R. 3299 attempts to codify the ‘‘valid when made’’ doctrine, 

which provides that if a loan is valid at its inception, it cannot subsequently become usurious if it is sold or transferred to another 

person. H.R. 3299 would overturn the Second Circuit Court of Appeals ruling in Madden v. Midland Funding, LLC, which declined 

to uphold the ‘‘valid when made’’ doctrine in the case. However, as 

drafted, the bill goes further than simply reverting back to the preMadden landscape and broadly expands the ability of non-banks to 

preempt state-level usury and consumer protection laws. In other 

words, the bill makes it easier for nonbanks, such as payday lenders, to use rent-a-bank arrangements to ignore state interest rate 

caps and make high-rate loans. Additionally, the bill includes no 

federal usury cap to limit the sweeping preemption of all state interest rate caps. 

Although ‘‘valid when made’’ is a longstanding principle, it is a 

contrived modern doctrine that does not exist universally in state 

or federal statute or case law. As a consequence, instead of simply 

overturning the Madden decision, H.R. 3299 would codify an expanded preemption power. This is especially disconcerting when 

non-bank third parties would be able, under the bill, to avail themselves of the privilege to preempt state interest rate laws. 

The National Bank Act of 1864 and subsequent laws (including 

the Dodd Frank Wall Street Reform and Consumer Protection Act) 

generally authorize the preemption of state banking laws. These 

preemption powers allow federally chartered banks to only abide by 

the usury laws of the state listed on their charters. Since the bill 

makes it clear that the interest rate on any loan that is validly 

originated by a national bank that is subsequently transferred to 

a third party, no matter how quickly, is enforceable, H.R. 3299 has 

the potential to inadvertently incentivize riskier lending. As written, the bill advances a dangerous precedent by allowing third parties that buy debt from national banks to collect on interest rates 

that would otherwise violate state usury laws. 

Proponents of the legislation argue that the status quo is problematic because it compels national banks to comply with a patchwork of state laws instead of oversight by federal banking regulators. However, if national banks are originating loans that they 

would not otherwise make because they know they will not hold 

the loans on their books, but instead immediately transfer them to 

a third party, this argument goes away as banks will have little to 

no interest in the loan. 

This bill would allow bad actors to benefit from our nation’s federal bank preemption and encourage unscrupulous lending. For 

these reasons, we oppose H.R. 3299. 

MAXINE WATERS. 

STEPHEN F. LYNCH. 

20 

CAROLYN B. MALONEY. NYDIA VELA ́ ZQUEZ. EMANUEL CLEAVER. DANIEL T. KILDEE. MICHAEL E. CAPUANO. AL GREEN. VICENTE GONZALEZ. 

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