Midland Funding Case Denied to be Heard by Supreme Court

The Supreme Court of the United States denied the certiorari petition in Madden v. Midland Funding, LLc. This case was a putative class action that alleged violations of the Fair Debt Collection Practices Act and New York’s usury law. The class representative, Saliha Madden, alleged that the defendants violated the FDCPA by charging and attempting to collect an interest rate higher than that permitted under the law of her home state of New York.

The case began in 2010 after Midland sent Madden a letter seeking to collect payment of a charged off credit card debt of approximately $5,000. The debt had been purchased by Midland, a debt buyer from FIA Card Services (Bank of America). The letter also stated that an interest rate of 27% per year was applied. Madden filed suit in 2011 alleging abusive and unfair debt collection practices in violation of the FDCPA and that the company had charged a usurious rate of interest in violation of New York General Business Law §349. In 2013, the District Court denied the defendants motion for summary judgement and Madden’s motion for class certification. The court found that the original agreement between Madden and FIA Card Services permitted the interest rate applied to the account. Additionally it held that Midland was allowed to charge the 27% interest rate because it was the assignee of the account.

On appeal, Madden argued that the District Court erred in holding that the National Bank Act’s preemption barred her state-law usury claims. The National Bank Act permits national banks to “charge on any loan… interest at a rate allowed by the laws of the State, Territory, or District where the bank is located.” It also provides for the exclusive cause of action for usury claims against national banks and completely preempts all comparable state-usury claims.

The Court of Appeals for the Second Circuit disagreed with the District court and held that Midland could not benefit from the National Bank Act. It reasoned that the District Court’s holding should be reversed because “neither defendant [was] a national bank nor a subsidiary or agent of a national bank…. and because application of the state law on which Madden’s claims rely would not significantly interfere with any national bank’s ability to exercise its powers under the NBA.”

In March 2016, the Supreme Court invited the Solicitor General’s Office to file a brief expressing the United States’ views on Madden. It was expected that the Solicitor General would set forth the views of the federal banking agencies and their positions regarding this case in his brief. The Supreme Court’s denial of certiorari in June means that the decision rendered by the Second Circuit will stand.