Invalid When Made: The District Court ' s Madden v. Midland Decision

Theseven-year saga ofMadden v. Midland began as a dispute over a four-figure consumer debt. But billions of dollars ’ worth of loans, and the future of consumer lending markets, now hang in the balance.Maddenbegan in 2011as a lawsuit based on a claim of usury. The plaintiff, Saliha Madden, a New York resident who had defaulted on $5,000 worth of credit card loans. The balance owed was later acquired by Midland Funding, a debt collector headquartered in California. Midland attempted to collect the debt with a default interest rate of 27 percent. Although the loan contract stipulated that it would be governed by Delaware law, which does not have a usury cap, Madden sued Midland, alleging unfair debt collection practices under federal law and usury under New York law — which considers interest rates above 25 percent usurious.The Southern District Court for New York ruled in favor of Midland, rejecting the claim of unfair collection practices and finding that the National Bank Act pre-empted the application of state usury law. But the Second Circuit Court of Appeals — which covers Connecticut and Vermont as well as Madden’s home state of New York — reversed the District Court ruling, finding that the National Bank Act pre-emption did not apply to Midland because Midland is not a national bank. Therefore, the opinion went, applying state usury law in this instance wouldnot hinder any national bank ’s powers. The Second Circuit therebyremanded the case back to the Dist...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs