The OCC has filed a Statement of Recent Decision in Support of Defendants’ Motion for Summary Judgment in the lawsuit filed by state AGs to enjoin the OCC’s final rule (Rule) purporting to override the Second Circuit’s Madden decision as to national banks and federal savings associations.

The recent decision submitted by the OCC, Robinson and Spears v. National Collegiate Student Loan Trust, involves the applicability of Pennsylvania interest rate laws to student loans originated by a national bank and sold to a statutory trust.  The plaintiffs (a borrower and co-signer) did not challenge the validity of the Rule but alleged that their loan were not “valid when made” because the interest rate was usurious under Pennsylvania law.  They also argued that the national bank was not the true lender because it never intended to own the loan and never had an economic interest in it.

The Massachusetts federal district court rejected both of the plaintiffs’ arguments.  With regard to their valid when made argument, the court determined that the interest rate on the loan was a rate that the national bank could permissibly charge under the National Bank Act (NBA).  Accordingly, because the plaintiffs’ loan was valid when made, the court found that it could not be invalidated by its assignment to the trust.  Citing to the U.S. Supreme Court’s Smiley decision, the district court indicated that the Rule, as an interpretation of the NBA, was entitled to deference from the court.

With regard to the plaintiffs’ argument that the bank was not the true lender, the district court found that their argument was contradicted by the purchase agreement between the bank and the trust which, among other things, required the bank to fund and fully disburse the loans sold to the trust, and by the loan agreement which named the bank as the lender.

The OCC’s filing is its second in the case since President Biden’s inauguration.  Its first such filing was its reply in support of its motion for summary judgment.  The OCC is currently under the leadership of Acting Comptroller of the Currency Blake Paulson and President Biden has not yet nominated a new Comptroller of the Currency.  We have speculated that a new Comptroller might want to revisit the Rule.  However, the OCC’s filing of the new decision coupled with its decision to continue to defend the Rule in its reply in support of its motion for summary judgment rather than seek an extension to give the new Comptroller an opportunity to review the litigation makes it appear increasingly unlikely that a new Comptroller will change course.