II 

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. 

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 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Protecting Consumers’ 

5 Access to Credit Act of 2017’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds that— 

mstockstill on DSK30JT082PROD with BILLS

2 

•S 1642 IS

1 (1) the contractual doctrine of valid-when-made 

2 provides, when applied to lending agreements, that 

3 a loan that is valid at inception cannot become usu4 rious upon the subsequent sale or transfer of the 

5 loan to another person; 

6 (2) this important and longstanding principle 

7 derives from the common law and its application has 

8 been a cornerstone of United States banking law for 

9 nearly 200 years, as provided in the case of Nichols 

10 v. Fearson, 32 U.S. (7 Pet.) 103, 106 (1833), in 

11 which the Supreme Court of the United States fa12 mously declared: ‘‘Yet the rule of law is everywhere 

13 acknowledged, that a contract free from usury in its 

14 inception, shall not be invalidated by any subsequent 

15 usurious transactions upon it.’’; 

16 (3) in 2016, the Solicitor General of the United 

17 States, in consultation with all Federal banking reg18 ulators, filed an amicus brief in the case of Midland 

19 Funding, LLC v. Madden, 136 S. Ct. 2505 (2016) 

20 (mem.), denying cert. to 786 F.3d 246, (2d Cir. 

21 2015), that described the United States Court of 

22 Appeals for the Second Circuit in that case as ‘‘in23 correct’’ with an ‘‘analysis reflect[ing] a misunder24 standing’’ of section 85 of the National Bank Act 

25 and precedent of the Supreme Court of the United 

mstockstill on DSK30JT082PROD with BILLS

3 

•S 1642 IS

1 States because the analysis contradicted the contrac2 tual doctrine of valid-when-made; 

3 (4) the valid-when-made doctrine, by bringing 

4 certainty to the legal treatment of all valid loans 

5 that are transferred, greatly enhances liquidity in 

6 the credit markets by widening the potential pool of 

7 loan buyers and reducing the cost of credit to bor8 rowers at the time of origination; 

9 (5) a joint academic study by professors at 

10 Stanford, Fordham, and Columbia Universities con11 cluded that the Madden v. Midland decision has al12 ready disproportionately affected low- and moderate13 income individuals in the United States with lower 

14 FICO scores; and 

15 (6) if the valid-when-made doctrine is not re16 affirmed soon by Congress, the lack of access to safe 

17 and affordable financial services will force the house18 holds in the United States with the fewest resources 

19 to seek financial products that are nontransparent, 

20 fail to inform consumers about the terms of credit 

21 available, and do not comply with State and Federal 

22 laws, including regulations. 

23 SEC. 3. RATE OF INTEREST AFTER TRANSFER OF LOAN. 

24 (a) AMENDMENT TO THE REVISED STATUTES.—Sec25 tion 5197 of the Revised Statutes (12 U.S.C. 85) is 

mstockstill on DSK30JT082PROD with BILLS

4 

•S 1642 IS

1 amended by adding at the end the following: ‘‘A loan that 

2 is valid when made as to its maximum rate of interest 

3 in accordance with this section shall remain valid with re4 spect to such rate regardless of whether the loan is subse5 quently sold, assigned, or otherwise transferred to a third 

6 party, and may be enforced by such third party notwith7 standing any State law to the contrary.’’. 

8 (b) AMENDMENT TO THE HOME OWNERS’ LOAN

9 ACT.—Section 4(g) of the Home Owners’ Loan Act (12 

10 U.S.C. 1463(g)) is amended by adding at the end the fol11 lowing: 

12 ‘‘(3) A loan that is valid when made as to its max13 imum rate of interest in accordance with this subsection 

14 shall remain valid with respect to such rate regardless of 

15 whether the loan is subsequently sold, assigned, or other16 wise transferred to a third party, and may be enforced 

17 by such third party notwithstanding any State law to the 

18 contrary.’’. 

19 (c) AMENDMENT TO THE FEDERAL CREDIT UNION

20 ACT.—Section 205(g) of the Federal Credit Union Act (12 

21 U.S.C. 1785(g)) is amended by adding at the end the fol22 lowing: 

23 ‘‘(3) A loan that is valid when made as to its max24 imum rate of interest in accordance with this subsection 

25 shall remain valid with respect to such rate regardless of 

mstockstill on DSK30JT082PROD with BILLS

5 

•S 1642 IS

1 whether the loan is subsequently sold, assigned, or other2 wise transferred to a third party, and may be enforced 

3 by such third party notwithstanding any State law to the 

4 contrary.’’. 

5 (d) AMENDMENT TO THE FEDERAL DEPOSIT INSUR6 ANCE ACT.—Section 27 of the Federal Deposit Insurance 

7 Act (12 U.S.C. 1831d) is amended by adding at the end 

8 the following: 

9 ‘‘(c) A loan that is valid when made as to its max10 imum rate of interest in accordance with this section shall 

11 remain valid with respect to such rate regardless of wheth12 er the loan is subsequently sold, assigned, or otherwise 

13 transferred to a third party, and may be enforced by such 

14 third party notwithstanding any State law to the con15 trary.’’. 

16 SEC. 4. RULE OF CONSTRUCTION. 

17 Nothing in this Act may be construed as limiting the 

18 authority or jurisdiction of the Office of the Comptroller 

19 of the Currency, the Federal Deposit Insurance Corpora20 tion, the Board of Governors of the Federal Reserve Sys21 tem, the Bureau of Consumer Financial Protection, or the 

22 National Credit Union Administration. 

Æ 

mstockstill on DSK30JT082PROD with BILLS