August 24, 2015
Debt Collection in Flux
Bloomberg BNA Banking Daily quoted me in Loans in Flux as Appeals Court Rebuffs Midland Funding (behind a paywall). It opens,
Lenders, investors and others are watching to see whether the U.S. Supreme Court is the next stop for a case raising questions about how a host of loans are collected, purchased, structured, and priced (Madden v. Midland Funding LLC, 2015 BL 162010, 2d Cir., No. 14-cv-02131, 5/22/15).
At issue is a May ruling by the U.S. Court of Appeals for the Second Circuit that said a debt collector cannot claim protection from state-law claims under the National Bank Act for loans acquired from a national bank (100 BBD, 5/26/15).
The ruling, which jolted banking lawyers who say the decision upsets expectations that assignees may charge and collect interest at rates that were valid at origination, hit with renewed force Aug. 12, when the Second Circuit turned away a petition to rehear the case (156 BBD, 8/13/15).
New questions about the impact of the case arise almost daily, but for many the main question is whether the debt collector, Midland Credit Management, will take the case to the U.S. Supreme Court.
Many expect the company to seek review by the justices. Midland has until early November to do so.
Brooklyn Law School Professor David Reiss isn’t making a prediction, but ticked off a list of factors that might make the difference, including a possible circuit split, questions raised by the case that have “serious doctrinal consequences” for the National Bank Act and other federal statutes, and the potential for friend-of-the-court briefs by the banking industry to grab the justices’ attention.
“While it is a fool’s game to predict confidently which cases will be picked up by the Supreme Court, this case has a bunch of characteristics that make it a contender,” Reiss said Aug. 17.
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