Permissible Interest on Loans That Are Sold, Assigned, or Otherwise Transferred

Published date21 November 2019
Citation84 FR 64229
Record Number2019-25280
SectionProposed rules
CourtThe Comptroller Of The Currency Office
Federal Register, Volume 84 Issue 225 (Thursday, November 21, 2019)
[Federal Register Volume 84, Number 225 (Thursday, November 21, 2019)]
                [Proposed Rules]
                [Pages 64229-64232]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2019-25280]
                ========================================================================
                Proposed Rules
                 Federal Register
                ________________________________________________________________________
                This section of the FEDERAL REGISTER contains notices to the public of
                the proposed issuance of rules and regulations. The purpose of these
                notices is to give interested persons an opportunity to participate in
                the rule making prior to the adoption of the final rules.
                ========================================================================
                Federal Register / Vol. 84, No. 225 / Thursday, November 21, 2019 /
                Proposed Rules
                [[Page 64229]]
                DEPARTMENT OF THE TREASURY
                Office of the Comptroller of the Currency
                12 CFR Part 7 and Part 160
                [Docket ID OCC-2019-0027]
                RIN 1557-AE73
                Permissible Interest on Loans That Are Sold, Assigned, or
                Otherwise Transferred
                AGENCY: Office of the Comptroller of the Currency, Treasury.
                ACTION: Notice of proposed rulemaking.
                -----------------------------------------------------------------------
                SUMMARY: Federal law establishes that national banks and savings
                associations (banks) may charge interest at the maximum rate permitted
                to any state-chartered or licensed lending institution in the state
                where the bank is located. Federal law also provides national banks and
                Federal savings associations with the authority to enter into and
                assign contracts. Well-established authority also authorizes banks to
                sell, assign, or otherwise transfer loans. Despite these clear
                authorities, recent developments have created uncertainty about the
                ongoing validity of the interest term after a bank sells, assigns, or
                otherwise transfers a loan. This rule would clarify that when a bank
                sells, assigns, or otherwise transfers a loan, interest permissible
                prior to the transfer continues to be permissible following the
                transfer.
                DATES: Comments must be received by January 21, 2020.
                ADDRESSES: Commenters are encouraged to submit comments through the
                Federal eRulemaking Portal or email, if possible. Please use the title
                ``Permissible Interest on Loans that are Sold, Assigned, or Otherwise
                Transferred'' to facilitate the organization and distribution of the
                comments. You may submit comments by any of the following methods:
                 Federal eRulemaking Portal--Regulations.gov Classic or
                Regulations.gov Beta.
                 Regulations.gov Classic: Go to https://www.regulations.gov/. Enter
                ``Docket ID OCC-2019-0027'' in the Search Box and click ``Search.''
                Click on ``Comment Now'' to submit public comments. For help with
                submitting effective comments please click on ``View Commenter's
                Checklist.'' Click on the ``Help'' tab on the Regulations.gov home page
                to get information on using Regulations.gov, including instructions for
                submitting public comments.
                 Regulations.gov Beta: Go to https://beta.regulations.gov/ or click
                ``Visit New Regulations.gov Site'' from the Regulations.gov Classic
                homepage. Enter ``Docket ID OCC-2019-0027'' in the Search Box and click
                ``Search.'' Public comments can be submitted via the ``Comment'' box
                below the displayed document information or by clicking on the document
                title and then clicking the ``Comment'' box on the top-left side of the
                screen. For help with submitting effective comments please click on
                ``Commenter's Checklist.'' For assistance with the Regulations.gov Beta
                site, please call (877) 378-5457 (toll free) or (703) 454-9859 Monday-
                Friday, 9 a.m.-5 p.m. ET or email [email protected].
                 Email: [email protected].
                 Mail: Chief Counsel's Office, Attention: Comment
                Processing, Office of the Comptroller of the Currency, 400 7th Street
                SW, Suite 3E-218, Washington, DC 20219.
                 Hand Delivery/Courier: 400 7th Street SW, Suite 3E-218,
                Washington, DC 20219.
                 Fax: (571) 465-4326.
                 Instructions: You must include ``OCC'' as the agency name and
                ``Docket ID OCC-2019-0027'' in your comment. In general, the OCC will
                enter all comments received into the docket and publish the comments on
                the Regulations.gov website without change, including any business or
                personal information provided such as name and address information,
                email addresses, or phone numbers. Comments received, including
                attachments and other supporting materials, are part of the public
                record and subject to public disclosure. Do not include any information
                in your comment or supporting materials that you consider confidential
                or inappropriate for public disclosure.
                 You may review comments and other related materials that pertain to
                this rulemaking action by any of the following methods:
                 Viewing Comments Electronically--Regulations.gov Classic
                or Regulations.gov Beta.
                 Regulations.gov Classic: Go to https://www.regulations.gov/. Enter
                ``Docket ID OCC-2019-0027'' in the Search box and click ``Search.''
                Click on ``Open Docket Folder'' on the right side of the screen.
                Comments and supporting materials can be viewed and filtered by
                clicking on ``View all documents and comments in this docket'' and then
                using the filtering tools on the left side of the screen. Click on the
                ``Help'' tab on the Regulations.gov home page to get information on
                using Regulations.gov. The docket may be viewed after the close of the
                comment period in the same manner as during the comment period.
                 Regulations.gov Beta: Go to https://beta.regulations.gov/ or click
                ``Visit New Regulations.gov Site'' from the Regulations.gov Classic
                homepage. Enter ``Docket ID OCC-2019-0027'' in the Search Box and click
                ``Search.'' Click on the ``Comments'' tab. Comments can be viewed and
                filtered by clicking on the ``Sort By'' drop-down on the right side of
                the screen or the ``Refine Results'' options on the left side of the
                screen. Supporting materials can be viewed by clicking on the
                ``Documents'' tab and filtered by clicking on the ``Sort By'' drop-down
                on the right side of the screen or the ``Refine Results'' options on
                the left side of the screen. For assistance with the Regulations.gov
                Beta site, please call (877) 378-5457 (toll free) or (703) 454-9859
                Monday-Friday, 9 a.m.-5 p.m. ET or email
                [email protected]. The docket may be viewed after the
                close of the comment period in the same manner as during the comment
                period.
                 Viewing Comments Personally: You may personally inspect
                comments at the OCC, 400 7th Street SW, Washington, DC 20219. For
                security reasons, the OCC requires that visitors make an appointment to
                inspect comments. You may do so by calling (202) 649-6700 or, for
                persons who are deaf or hearing impaired, TTY, (202) 649-5597. Upon
                arrival, visitors will be required to present valid government-issued
                photo identification and submit to security screening in order to
                inspect comments.
                FOR FURTHER INFORMATION CONTACT: Andra Shuster, Senior Counsel, Karen
                [[Page 64230]]
                McSweeney, Special Counsel, or Priscilla Benner, Attorney, Chief
                Counsel's Office, (202) 649-5490, for persons who are deaf or hearing
                impaired, TTY, (202) 649-5597, Office of the Comptroller of the
                Currency, 400 7th Street SW, Washington, DC 20219.
                SUPPLEMENTARY INFORMATION:
                I. Background
                 Federal law authorizes national banks and savings associations
                (banks) to charge interest at the maximum rate permitted to any state-
                chartered or licensed lending institution in the state where the bank
                is located. Pursuant to Federal law, national banks and Federal savings
                associations may also enter into contracts. Inherent in this authority
                is the authority to assign such contracts. In addition, well-
                established authority authorizes banks to sell, assign, or otherwise
                transfer their loans.
                 Despite these clear authorities, recent developments have created
                uncertainty about the ongoing validity of the interest term after a
                bank sells, assigns, or otherwise transfers a loan. After considering
                the principles discussed below, the OCC has concluded that when a bank
                sells, assigns, or otherwise transfers a loan, interest permissible
                prior to the transfer continues to be permissible following the
                transfer. This proposed rule would codify this conclusion.
                II. Analysis
                 Various provisions of Federal banking law, taken together, show
                that Congress created an integrated Federal scheme that permits
                national banks and Federal savings associations to operate across state
                lines without being hindered by differing state laws. See, e.g., 12
                U.S.C. 24, 85, 86, 371, and 1461 et seq. The National Bank Act (NBA)
                provides for a system of national banks to serve as ``instrumentalities
                of the federal government,'' \1\ which are ``designed to be used to aid
                the government in the administration of an important branch of the
                public service.'' \2\ The NBA contemplates that national banks will
                operate nationwide, and accordingly, it provides national banks
                ``protection from `possible unfriendly State legislation.' '' \3\
                Similarly, through the Home Owners' Loan Act (HOLA), ``Congress
                delegated to the [Federal Home Loan Bank Board (FHLBB)] broad authority
                to establish and regulate `a uniform system of [savings and loan]
                institutions where there are not any now,' and to `establish them with
                the force of the government behind them, with a national charter.' ''
                \4\
                ---------------------------------------------------------------------------
                 \1\ Davis v. Elmira Sav. Bank, 161 U.S. 275, 283 (1896).
                 \2\ Farmers' & Mechanics' Nat'l Bank v. Dearing, 91 U.S. 29, 33
                (1875).
                 \3\ Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 10 (2003)
                (quoting Tiffany v. Nat'l Bank of Mo., 85 U.S. 409, 412 (1873)).
                 \4\ Fid. Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141,
                166 (1982) (citations and footnote omitted).
                ---------------------------------------------------------------------------
                 To carry out Congress's purposes, the NBA vests in national banks
                enumerated powers and ``all such incidental powers as shall be
                necessary to carry on the business of banking.'' 12 U.S.C. 24(Seventh).
                HOLA provides Federal savings associations with broad authority to
                engage in banking activities. 12 U.S.C. 1464. These statutes grant
                national banks and Federal savings associations the power to make
                contracts, 12 U.S.C. 24(Third) and 1464,\5\ and the power to lend
                money. 12 U.S.C. 24(Seventh) and 1464.
                ---------------------------------------------------------------------------
                 \5\ Office of Thrift Supervision (OTS) letter from Carolyn J.
                Buck, November 22, 1995, 1995 WL 790839.
                ---------------------------------------------------------------------------
                 While not expressly stated in these statutes, among the essential
                rights normally associated with the power to contract is the ability to
                subsequently assign some or all of the benefits of a contract to a
                third party.\6\ Restatement (Second) of Contracts Sec. 317 (1981).
                Generally, all contract rights may be assigned in the absence of clear
                language expressly prohibiting the assignment or if the assignment
                would ``[(1)] materially change the duty of the obligor or [(2)]
                materially increase the obligor's burden or risk under the contract or
                [(3)] the contract involves obligations of a personal nature.'' 29
                Williston on Contracts Sec. 74:10 (4th ed.) (citations omitted). But
                see 29 Williston on Contracts Sec. 74:23 (stating that certain
                assignments may be specifically forbidden by statute or may otherwise
                be void as against public policy). All ordinary business contracts are
                assignable, and a contract for money to become due in the future is
                among the types of contracts that normally may be assigned.\7\ Upon
                assignment, the third-party assignee steps into the shoes of the bank;
                the assignee acquires and may enforce the rights the bank assigned to
                it under the contract.\8\
                ---------------------------------------------------------------------------
                 \6\ Rights authorized by a statute need not always be express--
                they are often implicit in the other rights given by the statute.
                See, e.g., Franklin Nat'l Bank v. New York, 347 U.S. 373, 377-78
                (1954) (concluding that the right to accept savings deposits
                implicitly included the right to advertise).
                 \7\ See Bank of America, N.A. v. Rice, 780 SE2d 873 (N.C. Ct.
                App. 2015).
                 \8\ Dean Witter Reynolds Inc. v. Var. Annuity Life Ins. Co., 373
                F.3d 1100, 1110 (10th Cir. 2004) (stating that it was long-
                established that ``an assignee stands in the shoes of the
                assignor'').
                ---------------------------------------------------------------------------
                 In the banking context, the authority of banks to sell, assign, or
                otherwise transfer (assign) a loan is a well-established element of the
                authority to make loans. Since at least 1848, the Supreme Court has
                recognized that a bank's authority to assign a loan is a power incident
                to the authority to make one, even if assignment is not expressly
                mentioned in the statute.\9\ Thus, the Federal statutes that provide
                national banks and Federal savings associations the authority to make
                loans also confer upon them the power to assign loans. 12 U.S.C.
                24(Seventh), 371, and 1464(c); see also 12 CFR 7.4008(a), 34.3, and
                160.30.
                ---------------------------------------------------------------------------
                 \9\ See Planters' Bank of Miss. v. Sharp, 47 U.S. 301, 322-23
                (1848); see also supra note 6.
                ---------------------------------------------------------------------------
                 As part of the authority to lend granted to national banks, Federal
                law establishes a clear and comprehensive scheme governing the interest
                that a bank may charge. Twelve U.S.C. 85 provides that a national bank
                may ``charge on any loan . . . interest at the rate allowed by the laws
                of the State . . . where the bank is located.'' \10\ Similarly, 12
                U.S.C. 1463(g), which is modeled on and interpreted in pari materia
                with section 85,\11\ provides that savings associations may
                ``[n]otwithstanding any State law . . . charge interest . . . at the
                rate allowed by the laws of the State in which such savings association
                is located.'' \12\
                ---------------------------------------------------------------------------
                 \10\ Alternatively, section 85 allows a national bank to charge
                ``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.'' 12 U.S.C. 85.
                Through interpretive letters, the OCC has addressed where a national
                bank is located for purposes of section 85. See, e.g., OCC
                Interpretive Letter 822 (Feb. 17, 1998).
                 \11\ See Gavey Props./762 v. First Fin. Sav. & Loan Ass'n, 845
                F.2d 519, 521 (5th Cir. 1988) (``Given the similarity of language,
                the conclusion is virtually compelled that Congress sought to
                provide federally insured credit institutions with the same `most-
                favored lender' status enjoyed by national banks.''); 61 FR 50951,
                50968 (Sept. 30, 1996) (``OTS and its predecessor, the FHLBB, have
                long looked to the OCC regulation and other precedent interpreting
                the national bank most favored lender provision for guidance in
                interpreting [12 U.S.C. 1463(g)] and OTS's implementing
                regulation.''); OTS letter from Harris Weinstein, December 24, 1992,
                1992 WL 12005275.
                 \12\ Section 1463(g) also allows savings associations to charge
                an alternate rate that is based on the relevant Federal Reserve
                discount rate for 90-day commercial paper. See supra note 10.
                ---------------------------------------------------------------------------
                 The intent of Congress when it originally enacted section 85 in
                1864 was to ensure parity between national and state banks in order to
                allow the new Federal charter to flourish and to establish a uniform
                national currency.\13\ When Congress enacted section 1463(g), it
                intended to place savings associations on equal footing with their
                national bank competitors. See supra note 11.
                ---------------------------------------------------------------------------
                 \13\ Cong. Globe, 38th Cong., 1st Sess., 2123-27 (1864). See
                Roper v. Consurve, Inc., 578 F.2d 1106 (5th Cir. 1978), affirmed 445
                U.S. 326 (1980).
                ---------------------------------------------------------------------------
                [[Page 64231]]
                 Sections 85 and 1463(g) have been interpreted to permit a bank to
                charge interest at the highest rate allowed to competing lenders by the
                state where the bank is located (known as the ``most favored lender''
                doctrine) and to export this rate to borrowers in other states,
                regardless of any other state law purporting to limit the interest
                permitted on bank loans.\14\
                ---------------------------------------------------------------------------
                 \14\ See Marquette Nat'l Bank of Minneapolis v. First of Omaha
                Serv. Corp., 439 U.S. 299, 310-14 (1978) (``[The bank] cannot be
                deprived of [its] location merely because it is extending credit to
                residents of a foreign State.'').
                ---------------------------------------------------------------------------
                 Federal law thus establishes that a bank may enter into a loan
                contract, charge interest at the maximum rate permitted in the state
                where it is located, and subsequently assign the loan. These
                authorities, in turn, provide the fundamental transactional building
                blocks that are used to construct important portions of the nation's
                banking system. For example, the ability to originate loans and
                subsequently securitize them on the secondary market depends upon the
                ability of banks to assign all or part of their ownership interest in a
                loan.
                 Despite the fact that these well-established and heretofore well-
                understood authorities previously had not been seriously called into
                question, a recent decision from the United States Court of Appeals for
                the Second Circuit has created uncertainty regarding the ongoing
                validity of the interest term determined under section 85 after a
                national bank assigns a loan.\15\ Through this rulemaking, the OCC
                seeks to end this uncertainty by clarifying that when a bank assigns a
                loan, interest permissible prior to the assignment will continue to be
                permissible following the assignment.
                ---------------------------------------------------------------------------
                 \15\ See Madden v. Midland Funding, LLC, 786 F.3d 246 (2nd Cir.
                2015).
                ---------------------------------------------------------------------------
                 Multiple legal principles support the OCC's interpretation. First,
                well before the passage of the NBA or the HOLA, the Supreme Court
                recognized the longstanding common law principle of valid-when-made and
                described it as a ``cardinal rule[ ] in the doctrine of usury.'' \16\
                The valid-when-made principle provides that if a loan is non-usurious
                at origination, the loan does not subsequently become usurious when
                assigned.\17\ This longstanding rule relating to usury certainly
                applies here; a loan by a bank that complies with section 85 or 1463(g)
                is by definition not usurious when it is originated, and a subsequent
                assignment of the loan does not render the loan usurious.
                ---------------------------------------------------------------------------
                 \16\ See Nichols v. Fearson, 32 U.S. (7 Pet.) 103, 109 (1833).
                 \17\ See id. (``[A] contract, which, in its inception, is
                unaffected by usury, can never be invalidated by any subsequent
                usurious transaction.''); Gaither v. Farmers & Mechs. Bank of
                Georgetown, 26 U.S. (1 Pet.) 37, 43 (1828).
                ---------------------------------------------------------------------------
                 Apart from being the natural result if one applies the valid-when-
                made principle, this conclusion is also supported by banks' ability to
                assign contracts. As noted above, national banks and Federal savings
                associations may assign their loan contracts to third parties. Because
                the assignee steps into the bank's shoes upon assignment, the third
                party receives the benefit of and may enforce the permissible interest
                term. Again, the loan does not become usurious after the assignment
                simply because the third party is enforcing the contractually agreed
                upon interest term.\18\ An assignment does not normally change the
                borrower's obligation to repay in any material way. See 29 Williston on
                Contracts Sec. 74:10.
                ---------------------------------------------------------------------------
                 \18\ See Olvera v. Blitt & Gaines, P.C., 431 F.3d 285, 286, 289
                (7th Cir. 2005) (``[T]he assignee of a debt . . . is free to charge
                the same interest rate that the assignor . . . charged the debtor .
                . . even if the assignee does not have a license that expressly
                permits the charging of a higher rate.'').
                ---------------------------------------------------------------------------
                 Finally, a bank's well-established authority to assign a loan may
                be unduly curtailed if the bank cannot be certain that interest
                permissible prior to the assignment will remain permissible afterwards.
                Congress would not have intended to limit banks' authority in this
                manner.\19\ Even in the mid-nineteenth century, banks' ability to
                assign their loans was recognized as an important tool to manage
                liquidity and enhance safety and soundness. As the Supreme Court
                stated, ``[banks] must be able to assign or sell [their] notes when
                necessary and proper, as, for instance, to procure more specie in an
                emergency, or return an unusual amount of deposits withdrawn, or pay
                large debts for a banking-house.'' \20\ The Court further observed that
                while a bank may have other tools to respond to these circumstances,
                assigning loans may be the ``wiser and safer'' course of action.\21\
                Although the banking system has evolved significantly in the 150 years
                since Planters' Bank, banks of all sizes continue to routinely rely on
                loan assignments and securitization to access alternative funding
                sources, manage concentrations, improve financial performance ratios,
                and more efficiently meet customer needs. This risk management tool
                would be significantly weakened if the permissible interest on assigned
                loans were uncertain or if assignment of the permissible interest were
                limited only to third parties that would be subject to the same or
                higher usury caps.
                ---------------------------------------------------------------------------
                 \19\ See Franklin, 347 U.S. at 377-78.
                 \20\ Planters' Bank of Miss., 47 U.S. at 323.
                 \21\ Id.
                ---------------------------------------------------------------------------
                 The conclusion that interest permissible prior to the assignment of
                a loan continues to be permissible following the assignment is also
                consistent with the purpose of sections 85 and 1463(g)--to facilitate
                banks' ability to operate across state lines by eliminating the burden
                of complying with each state's interest laws. This ability to operate
                on an interstate basis under a uniform set of standards, including with
                respect to interest, is fundamental to the character of national banks
                and has been since their inception.\22\ Recognizing the value of this
                uniformity in applicable interest law, Congress extended the principles
                of section 85 to savings associations, state-chartered insured
                depository institutions, and insured credit unions in 1980. See 12
                U.S.C. 1463(g), 1785, and 1831d. Then, in 2010, while carefully
                examining the application of state law to Federally-chartered banks,
                Congress expressly preserved national banks' authority under section 85
                and thereby reaffirmed the importance of section 85 and similar
                statutes to the banking system.\23\ Reading sections 85 and 1463(g) as
                applying only to loans that a bank holds on its books would thwart this
                statutory scheme and would be inconsistent with the valid-when-made and
                assignability principles discussed above.
                ---------------------------------------------------------------------------
                 \22\ ``National banks have been National favorites . . . It
                could not have been intended, therefore, to expose them to the
                hazard of unfriendly legislation by the States . . . .'' Tiffany, 85
                U.S. at 413. The NBA ``has in view the erection of a system
                extending throughout the country, and independent, so far as powers
                conferred are concerned, of state legislation which, if permitted to
                be applicable, might impose limitations and restrictions as various
                and as numerous as the states.'' Easton v. Iowa, 188 U.S. 220, 229
                (1903).
                 \23\ Section 1044(a) of the Dodd-Frank Wall Street Reform and
                Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (July
                21, 2010).
                ---------------------------------------------------------------------------
                 Based on the foregoing, the OCC concludes that, as a matter of
                Federal law, banks may assign their loans without impacting the
                validity or enforceability of the interest.
                III. Summary of the Proposal
                 The OCC would amend 12 CFR 7.4001 and 12 CFR 160.110 by adding a
                new paragraph, which would provide that interest on a loan that is
                permissible under sections 85 and 1463(g)(1), respectively, shall not
                be affected by the sale, assignment, or other transfer of the loan.\24\
                This rule would
                [[Page 64232]]
                expressly codify what the OCC and the banking industry have always
                believed and address recent confusion about the impact of an assignment
                on the permissible interest. This rule would not address which entity
                is the true lender when a bank makes a loan and assigns it to a third
                party. The true lender issue, which has been considered by courts
                recently, is outside the scope of this rulemaking.
                ---------------------------------------------------------------------------
                 \24\ The Federal Deposit Insurance Corporation (FDIC) is also
                proposing a similar rule based on 12 U.S.C. 1831d. The FDIC has
                interpreted this provision to be consistent with section 85
                (including OCC precedent). See, e.g., FDIC General Counsel's Opinion
                No. 11, Interest Charges by Interstate State Banks, 63 FR 27282 (May
                18, 1998).
                ---------------------------------------------------------------------------
                IV. Solicitation of Comments
                 The OCC invites comment on all aspects of this proposal.
                V. Regulatory Analyses
                Paperwork Reduction Act
                 In accordance with the requirements of the Paperwork Reduction Act
                of 1995 (PRA), 44 U.S.C. 3501 et seq., the OCC may not conduct or
                sponsor, and respondents are not required to respond to, an information
                collection unless it displays a currently valid Office of Management
                and Budget (OMB) control number. The OCC has reviewed the notice of
                proposed rulemaking and determined that it would not introduce any new
                or revise any existing collection of information pursuant to the PRA.
                Therefore, no submission will be made to OMB for review.
                Regulatory Flexibility Act
                 The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq.,
                requires an agency, in connection with a proposed rule, to prepare an
                Initial Regulatory Flexibility Analysis describing the impact of the
                rule on small entities (defined by the Small Business Administration
                (SBA) for purposes of the RFA to include commercial banks and savings
                institutions with total assets of $600 million or less and trust
                companies with total assets of $41.5 million of less) or to certify
                that the proposed rule would not have a significant economic impact on
                a substantial number of small entities. The OCC currently supervises
                approximately 755 small entities.\25\ The ability to sell, assign, or
                otherwise transfer a loan is important to all banks, so the OCC expects
                that all of these small entities would be impacted by the rule.
                However, the rule does not contain any new recordkeeping, reporting, or
                significant compliance requirements. Therefore, the OCC anticipates
                that costs, if any, will be de minimis and certifies that this rule, if
                adopted, would not have a significant economic impact on a substantial
                number of small entities. Accordingly, a Regulatory Flexibility
                Analysis is not required.
                ---------------------------------------------------------------------------
                 \25\ The OCC bases its estimate of the number of small entities
                on the SBA's size thresholds for commercial banks and savings
                institutions, and trust companies, which are $600 million and $41.5
                million, respectively. Consistent with the General Principles of
                Affiliation, 13 CFR 121.103(a), the OCC counts the assets of
                affiliated financial institutions when determining if the OCC should
                classify an OCC-supervised institution as a small entity. The OCC
                uses December 31, 2018, to determine size because a ``financial
                institution's assets are determined by averaging the assets reported
                on its four quarterly financial statements for the preceding year.''
                See footnote 8 of the SBA's Table of Size Standards.
                ---------------------------------------------------------------------------
                Unfunded Mandates Reform Act
                 The Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1532,
                requires the OCC to consider whether the proposed rule includes a
                Federal mandate that may result in the expenditure by state, local, and
                tribal governments, in the aggregate, or by the private sector, of $100
                million or more in any one year (adjusted for inflation). The proposed
                rule does not impose new mandates. Therefore, the OCC concludes that
                implementation of the proposed rule would not result in an expenditure
                of $100 million (adjusted for inflation) or more annually by state,
                local, and tribal governments, or by the private sector.
                Riegle Community Development and Regulatory Improvement Act
                 Pursuant to section 302(a) of the Riegle Community Development and
                Regulatory Improvement Act of 1994 (RCDRIA), 12 U.S.C. 4802(a), in
                determining the effective date and administrative compliance
                requirements for new regulations that impose additional reporting,
                disclosure, or other requirements on insured depository institutions,
                the OCC must consider, consistent with principles of safety and
                soundness and the public interest, any administrative burdens that such
                regulations would place on depository institutions, including small
                depository institutions, and customers of depository institutions, as
                well as the benefits of such regulations. In addition, section 302(b)
                of RCDRIA, 12 U.S.C. 4802(b), requires new regulations and amendments
                to regulations that impose additional reporting, disclosures, or other
                new requirements on insured depository institutions generally to take
                effect on the first day of a calendar quarter that begins on or after
                the date on which the regulations are published in final form. The OCC
                invites comments that will inform its consideration of RCDRIA.
                List of Subjects
                12 CFR Part 7
                 National banks, Interest, Usury.
                12 CFR Part 160
                 Savings associations, Interest, Usury.
                Office of the Comptroller of the Currency
                 For the reasons set out in the preamble, the OCC proposes to amend
                12 CFR part 7 and part 160 as follows.
                PART 7--ACTIVITIES AND OPERATIONS
                0
                1. The authority citation for part 7 continues to read as follows:
                 Authority: 12 U.S.C. 1 et seq., 25b, 29, 71, 71a, 92, 92a, 93,
                93a, 95(b)(1), 371, 371d, 481, 484, 1463, 1464, 1465, 1818, 1828(m)
                and 5412(b)(2)(B).
                Subpart D--Preemption
                0
                2. Section 7.4001 is amended by adding paragraph (e) to read as
                follows:
                Sec. 7.4001 Charging interest by national banks at rates permitted
                competing institutions; charging interest to corporate borrowers.
                * * * * *
                 (e) Transferred loans. Interest on a loan that is permissible under
                12 U.S.C. 85 shall not be affected by the sale, assignment, or other
                transfer of the loan.
                PART 160--LENDING AND INVESTMENT
                0
                3. The authority citation for part 160 continues to read as follows:
                 Authority: 12 U.S.C. 1462a, 1463, 1464, 1467a, 1701j-3, 1828,
                3803, 3806, 5412(b)(2)(B); 42 U.S.C. 4106.
                0
                4. Section 160.110 is amended by adding paragraph (d) to read as
                follows:
                Sec. 160.110 Most favored lender usury preemption for all savings
                associations.
                * * * * *
                 (d) Transferred loans. Interest on a loan that is permissible under
                12 U.S.C. 1463(g)(1) shall not be affected by the sale, assignment, or
                other transfer of the loan.
                 Dated: November 18, 2019.
                Morris R. Morgan,
                First Deputy Comptroller, Comptroller of the Currency.
                [FR Doc. 2019-25280 Filed 11-20-19; 8:45 am]
                BILLING CODE 4810-33-P
                

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT