Parties seek preliminary approval of class settlement in Madden v. Midland Funding
The parties in Madden v. Midland Funding, LLC filed a joint motion in New York federal district court seeking preliminary approval of a proposed class settlement.
The parties in Madden v. Midland Funding, LLC filed a joint motion in New York federal district court seeking preliminary approval of a proposed class settlement.
The case has drawn attention in consumer finance and debt-collection circles because it concerns whether a debt buyer that purchased charged-off credit card debt from a national bank can collect interest at a rate tied to the bank’s authority, or whether state usury limits apply instead.
What happened
According to the source article, the underlying class action alleged that a debt buyer purchased charged-off credit card debt from a national bank and then falsely represented the amount of interest it was entitled to collect. The complaint also alleged violations of the Fair Debt Collection Practices Act and New York usury law.
The source says the Second Circuit held that a purchaser of charged-off debt from a national bank does not inherit the national bank’s preemptive interest-rate authority under Section 85 of the National Bank Act. On that view, the debt buyer may be subject to state usury limits.
The U.S. Supreme Court denied the defendants’ petition for certiorari in June 2016, the source says.
Why it matters
The proposed settlement could resolve claims tied to collection letters that allegedly sought interest above 25% per year. The source describes the proposed class as New York residents who were sent such letters about personal, family, or household debts.
The case also raises a broader legal question for debt buyers and lenders: when a bank sells charged-off debt, what interest terms follow the debt after the sale, and what state-law limits remain in place?
Context and background
The source says the proposed settlement class is limited to debts whose cardholder agreements either choose the law of a state that, like Delaware, has no usury cap, or choose no law other than New York.
It also says the class includes two subclasses, one tied to New York usury-law claims and one tied to FDCPA claims, each covering a specified period. The excerpt does not provide those dates.
What was said
The source article includes an advocacy-style statement urging the Office of the Comptroller of the Currency to address “true lender” and Madden risks through rulemaking. That statement appears to be commentary rather than a reported agency action.
What happens next
The next step in the case is for the court to decide whether to grant preliminary approval of the proposed settlement. The source article does not provide a hearing date or a timetable for final approval.
Sources
Editorial note: This article was prepared with AI assistance and includes source attribution for reader review.
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