On June 27, the Supreme Court declined to review a ruling by the United States Court of Appeals for the Second Circuit, allowing the decision in the class-action lawsuit against the debt collection company Encore Capital Group Inc., Midland Funding and Midland Credit Management to stand.
As is typically done in the debt collection industry, Midland had purchased millions of dollars of debt from Bank of America for pennies on the dollar, hoping to collect repayment at a higher rate from the borrowers. Midland rendered a 27 percent annual interest rate on New York resident Saliha Madden’s credit card debt she incurred years earlier through the Bank of America.
In May 2015, Ms. Madden commenced a class-action lawsuit against Midland and argued that the company could not charge her the 27 percent interest rate on her credit card debt because it exceeded the interest limits in her home state. The Second Circuit ruled in favor of Ms. Madden, stating that debt collection companies are not protected under the National Bank Act and must abide by the interest rate cap set under a state’s “usury” laws. The Appeals Court’s ruling extends to borrowers in New York, Connecticut and Vermont.
According to the New York Times, the Appeals Court’s decision is limited. In the Madden case, the borrower no longer had a relationship established with the bank after it sold off the debt to the loan collection company. However, the original interest rate a financial institution charges on credit card debt may still be applicable even after the debt has been sold.
At some point, a business owner may need to collect on debt owed under loan agreements, contracts, services, transactions, promissory notes, and goods that were sold and delivered. Hobson-Williams, P.C. is a full-service debt collections department that is available to advise you of your rights when it comes to debt collection. The firm’s debt collection attorneys practice in accordance with all federal and state debt collection laws when dealing with debtors. For more information, call 1 (866) 825-1529.