By: Marc A. Rapaport, Esq.
January 29, 2017
In the case Madden v. Midland Funding, LLC, which has been
pending for more than five years in United States District Court for the
Southern District of New York, plaintiff Saliha Madden has
courageously challenged the unlawful debt collection practices of
Midland Funding, one of the largest and most unscrupulous buyers of
consumer debt in the United States. Because so many Americans have been
devastated both emotionally and financially by Midland's violations of
the law, we are taking this opportunity to describe how one consumer has
courageously fought back. You can read a copy of Ms. Madden's federal
court complaint against Midland Funding here.
In 2005, Ms. Madden opened a credit card account with Bank of America.
In 2008, Ms. Madden's debt of approximately $5,000 was written off as
uncollectable. As many Americans have painfully learned, after banks
write off consumer debts, debt buyers step in and begin aggressive
collection actions to earn profits off of the accounts for which they
have paid pennies on the dollar. Ms. Madden's account was purchased by
Midland Funding, which sent Ms. Madden a letter demanding payment and
stating that an interest rate of 27% per year applied.
In most circumstances, banks get away with charging enormous rates of
interest because the National Banking Act (NBA) allows national banks to
charge on any loan the rate of interest allowed by laws of the state
where the bank is located. Thus, national banks do not have to be
concerned about usury laws of states where consumer borrowers live. As a
practical matter, banks need only incorporate in a state (such as
Delaware) which has lax standards regarding interest rates chargeable to
consumers.
But Ms. Madden's attorneys astutely realized that because Midland
Funding was merely a debt buyer rather than a national bank, Midland
Funding was not covered by the NBA, and thus it had no valid basis to
charge Ms. Madden an interest rate that far exceeded the percentage
allowed by New York's usury laws. In May 2015, the United States Court
of Appeals for the Second Circuit issued a decision concluding that the
NBA does not protect debt buyers from usury claims filed against them
under state law. This decision is a huge victory for consumers.
Although Ms. Madden's federal class action case against Midland Funding
still continues, her victory at the Court of Appeals is a major step
forward for consumers who are harassed by debt buyers.
Marc Rapaport is the founder and managing member of Rapaport Law Firm, PLLC in New York City.
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