Title: Protecting Consumers' Access to Credit Act of 2017
Policy area: Finance and Financial Sector

Summary:
Protecting Consumers' Access to Credit Act of 2017
This bill amends the Revised Statutes, the Home Owners' Loan Act, the Federal Credit Union Act, and the Federal Deposit Insurance Act to state that bank loans that are valid when made as to their maximum rate of interest in accordance with federal law shall remain valid with respect to that rate regardless of whether a bank has subsequently sold or assigned the loan to a third party.

[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.


_______________________________________________________________________


                   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.

    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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