On June 27, 2016, the United States Supreme Court denied certiorariin Madden v. Midland Funding, LLC. This outcome is consistent with the Solicitor General's position that further review is not appropriate at this time. We previously addressed this case and petition here and the Solicitor General's brief here.
The defendants, a non-bank that purchased Ms. Madden's defaulted credit card debt from a national bank located in Delaware, and the purchaser's servicing affiliate, sought review of the Second Circuit's controversial holding that preemption of state usury laws under the National Bank Act ("NBA") does not extend to non-bank purchasers of debt. The Second Circuit's opinion left open the possibility that a Delaware choice-of-law provision in Madden's credit card agreement may provide the defendants an alternative basis for applying an interest rate exceeding that permitted under the usury law of Madden's home state of New York.
The Supreme Court's decision to deny certiorari is unfortunate but not surprising. There is no circuit split at this time, and it is possible that the defendants will prevail in the trial court on remand. The Solicitor General cited these and other reasons as grounds for denying certiorari.
Future proceedings in the trial court regarding the effect of the credit card agreement choice-of-law provision now take on enhanced importance. Outside of the Second Circuit, the Solicitor General's brief, which rejected aspects of the Second Circuit's reasoning on NBA preemption, may provide a roadmap for courts, litigants, and market participants. Some lenders, including certain marketplace lending platforms, have taken steps to attempt to reconcile their business models with the Second Circuit's decision.
Until the trial court resolves the choice-of-law issue and other circuits weigh in on the scope of NBA preemption, however, the Supreme Court's denial of certiorari will be a source of continued uncertainty that is likely to reduce the amount of credit available to borrowers and increase costs for all market participants.