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SFA Jointly Files Amicus Brief in FDIC Valid-When-Made Litigation

article by Structured Finance Association

Main Takeaway

In its continued support of the fundamentally important Valid-When-Made doctrine, on June 16, 2021, SFA filed a joint amicus brief with four other trade groups in the case filed against the Federal Deposit Insurance Corporation (FDIC) rulemaking by the state of California in the Northern District of California. In the amicus brief SFA calls out the longstanding legal precedent applying the Valid-When-Made doctrine and the protection against harmful economic consequences that the FDIC Rule provides.


Our brief is in support of the FDIC’s cross-motion for summary judgment and opposition to Plaintiffs’ motion for summary judgment in the People of the State of California, et. Al. v. The Federal Deposit Insurance Corporation case (Case No. 4:20-cv-05860-JSW) which jeopardizes the long-standing judicial precedent of the Valid-When-Made doctrine. The FDIC rulemaking at issue in the case reaffirms the Valid-When-Made doctrine, which asserts a loan that is valid from the start cannot become usurious after the loan is sold or transferred to another person.

SFA Key Points

  • SFA argues that the FDIC rule is consistent with the Federal Deposit Insurance Act (FDIA) and longstanding law applying the Valid-When-Made doctrine and the FDIA. The FDIA provisions allow a federally insured state-chartered bank or an insured branch of a foreign bank (“FDIC Banks”) to originate loans at interest rates of the state in which it is located and allow such loans to be transferred to a third party with the original interest rate intact.
  • SFA emphasizes how FDIC Banks making loans would have a severely limited ability to sell or assign loans to third parties in the absence of the rule potentially impacting their ability to provide credit to consumers and businesses.