The Republican members of the House Financial Services Committee have written a letter to Joseph Otting, the Comptroller of the Currency, urging the regulator to use “administrative solutions to mitigate the consequences” of the Appeals Court ruling in Madden v. Midland Funding.
The ruling has led to a decline in credit availability in states that fall within the Second Circuit Court of Appeals, including Connecticut, New York, and Vermont, according to the 26 members of Congress who signed the letter, a copy of which can be accessed by clicking here.
In February 2018, the Appeals Court ruled that a debt buyer was not privy to the same pre-emption from state usury laws as a financial institution that originated the loan. In this case, Midland attempted to continue to charge the same interest rate on a credit card that was originally originated by Bank of America. The interest rate on the loan exceeded the amount allowed by New York state law, but BofA was pre-empted from following that law under the National Bank Act. Midland appealed the ruling to the Supreme Court, which declined to hear arguments in the case.
The legal argument in this particular case is a doctrine known as “valid when made,” which ensures that loans remain valid after they are sold or transferred.
In reaching out to the Comptroller of the Currency, which regulates national banks, the Republicans on the Financial Services Committee are asking for the Office of the Comptroller of the Currency to update its definition of “interest,” “to ensure that our nation’s policies governing usury laws are applied on a clear, consistent basis nationwide.”