Today, the U.S. Supreme Court decided not to review a Second Circuit decision that found state usury laws applied to debt that had been purchased from a national bank.

insideARM has previously written two separate stories on the Madden case, the most recent on April 1, 2016.


Midland Funding LLC (Midland) had purchased Madden’s charged-off credit card account of approximately $5000 from FIA Card Services. Midland, however, is not a national bank.

In November of 2010 Midland sent Madden a letter seeking to collect payment of the debt and stating that an interest rate of 27% per year applied.

Midland’s position was that the National Bank Act permits the higher interest rate above and, as an assignee of the account, they stepped into the shoes of a national bank when they purchased the account.

A lower court had previously ruled that the original agreement between Madden and the national bank permitted the interest rate applied to the account and, as an assignee from a national bank, Midland was allowed to charge that rate.

The Court of Appeals for the Second Circuit disagreed with the lower court; holding that, although National Bank Act preemption “may extend to entities beyond a national bank itself,” the defendants (Midland) could not benefit from the act’s preemptive effect.

insideARM Perspective

As we noted in our last article, the case involved a significant issue for debt buyers. The national bank preemption would simplify decisions on applicable interest rates for debt buyers of accounts from national banks. Rather than attempting to determine applicable interest rates on an account-by-account, state-by-state, basis the debt buyer could simply rely on the interest rate charged by the national bank.

The denial of certiorari means the Second Circuit decision will stand.

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