Legal Seminar, Denver, CO

Madden v. Midland: Background • Like the true lender cases, Madden v. Midland involved the applicability of interest rate exportation after loan assignment to/purchase by nonbank affiliates and third parties. • Unlike the true lender cases, there was no dispute in Madden as to whether the bank was the true lender and had only a limited connection with the nonbank debt collector • The central issue in Madden was whether a loan that, under federal interest rate exportation laws, is valid when made by a bank remains valid when assigned to a nonbank to which those laws do not apply.

Confidential / Sensitive / Pre-Decisional – For Discussion Purposes Only

Madden v. Midland: Procedural Background • Madden filed a class action in SDNY against Midland alleging that Midland was attempting to collect a rate of interest that was usurious under New York’s civil and criminal usury laws. • Midland sought summary judgment on ground that Section 85 of the NBA expressly preempted the state law usury claim. • The District Court granted summary judgment to Midland, holding that Madden’s claims were preempted by the NBA – Determined that “because FIA is a national bank entitled to exemption from state usury laws, [Midland is] entitled to the same if [it is] FIA’s assignee.” – Court relied on: • Phipps v. FDIC , 417 F.3d 1006 (8th Cir. 2005); Krispin. • Valid-when-made doctrine: a “cardinal rule of usury”. Nichols v. Fearson , 32 U.S. 103 (1833).

For Discussion Purposes Only