SCOTUS Denies Petition for Certiorari in Securitization Case Involving State Usury Law

U.S. Supreme Court OCC National Bank Act Debt Buying Usury Madden

On June 27, the United State Supreme Court denied a debt buyer’s petition for certiorari in a Second Circuit case that raises the issue of whether New York’s state usury law is preempted by the National Bank Act (NBA) when a national bank-originated debt is purchased by a nonbank. Midland v. Madden, No. 15-610 (U.S. June 27, 2017). As previously covered in InfoBytes, the nonbank debt buyer was assigned debt owed by a New York consumer. The debt carried an interest rate in excess of that permitted by New York law but which was permitted by the law of the bank’s home state, which the bank lawfully “exported.” Facing a usury challenge, the debt buyer argued that it was able to continue charging the valid rate made by the national bank and that it did not have to abide by the consumer debtor’s state usury laws. The Second Circuit rejected the debt buyer’s argument, reasoning that the NBA did not apply to the debt buyer because it was not acting on the national bank’s behalf. The Supreme Court did not grant the debt buyer’s petition for certiorari, leaving the Second Circuit ruling in effect. Notably, at the request of the Supreme Court, the Solicitor General and the OCC filed a brief stating the position of the United States as to whether the Supreme Court should grant the petition for certiorari. Although the brief advised that the Court not grant certiorari, the Government’s brief sharply criticized the Second Circuit’s decision.