States Challenge FDIC Interest Rate Rule for Bank, Fintech Loans

New York, California, and several other states have filed a lawsuit against the FDIC’s “valid-when-made” rule on bank loan transfers, alleging that it prevents them from enforcing interest rate caps that protect consumers from predatory lending.

The FDIC exceeded its authority and violated the Administrative Procedure Act when it issued the June 25 rule, according to the lawsuit filed Thursday in the U.S. District Court for the Northern District of California.

The rule affirmed that interest rates on bank loans remain valid when sold or assigned to investors or fintech business partners. It was meant to settle market uncertainty ...