What happens when you open a credit card account with a bank, only to have it ending up with a non-banking funding entity or agency?
In the current case, Saliha Madden (Madden) opened a credit card account with the Bank of America, which consolidated its credit card program into another national bank. From there, Madden’s account and the debt it signified, was sold off to Midland Funding, LLC (Midland). Midland is not a bank, nor is the affiliate Midland Credit Management (Midland Credit) that was employed to collect the debt a bank. Midland Credit levied an interest rate of 27% per year and sent a letter to Madden, seeking payment of the debt.
A suit was then filed by Madden against Midland Funding affirming that there was a violation of the Fair Debt Collection Practices Act (FDCPA). The suit also asserted that this was a violation of the usury law in New York that imposed a maximum interest rate of 25%.
On June 27, 2016, the Supreme Court refused to review a decision by a Second Circuit Court of Appeals.
In their defense, Midland said that the National Bank Act (NBA) permits the higher interest rate. Further, it was ruled by a lower court that as per the original agreement between Madden and the Bank of America, a national bank, Midland, who was an assignee from the national bank, could charge that interest rate.
However, the Court of Appeals for the Second Circuit disagreed with the lower court in that though the NBA preemption “may extend to entities beyond a national bank itself,” Midland could not benefit from the Act’s effect.
Our take on it
The Midland Funding LLC vs. Madden case highlights the challenges faced by debt buyers, in turn, by the consumers who eventually face harassment over debt collection calls, which might at times overstep the boundaries; creating violations. Given the valid-when-made doctrine, banks can originate loans bearing higher rates of interest than that sanctioned by the borrower’s state laws and further sell the loan to a non-bank organization that collects the loan at whichever rate of interest has been agreed upon.
When it comes to usury loans, the laws can be confusing because they differ from state to state. Also, the NBA’s influence and preemptions can be difficult to understand, as well as their effect or influence on different kinds of loans.
On the consumer’s part, Madden displays awareness of legal rights concerning what is a violation of the FDCPA. In the face of confusing legalese, consumers need to be aware of their rights. While it is impossible to know the laws spanning different kinds of loans, it is always possible for a consumer to reach out for professional help.
It is imperative that consumers do not get intimidated by entities or automatically assume them to be correct.
Legal Rights Advocates, PLLC is a law firm that specializes in helping clients who are being harassed by debt collectors. Our team of attorneys, over the years, has helped countless clients get protections from debt collection practices that are deemed as unlawful and illegal under the FDCPA and TCPA laws.
If you are a consumer interested in learning more about how to safeguard yourself better with FDCPA and TCPA laws, call us at (855) 254-7841 for immediate assistance.