NY Credit Card Securitization Class Action Misuses Madden

5 minute read | July.18.2019

The U.S. Court of Appeals for the Second Circuit's decision in Madden v. Midland Funding LLC is deservedly notorious. The Madden court erroneously held that state usury laws may prohibit a national bank’s assignee from enforcing the interest rate on a credit agreement that was valid under the law of the state in which the national bank is located.

This holding conflicts with the valid-when-made doctrine, long recognized in common law, as well as with key preemption principles stemming from a national bank’s Section 85 authority to charge interest up to the maximum permitted by its home state and the express power in 12 U.S.C. § 24 (Seventh) to sell loans that it so originates. Many commentators recognize the manifest problems of Madden, as does the Office of the Comptroller of the Currency and the solicitor general, as expressed in an amicus brief to the Supreme Court filed in connection with a failed petition for certiorari to the Supreme Court.

Originally published in Law360; reprinted with permission.