ABA Files Amicus Brief Over National Bank Act

Case: Madden v. Midland Funding, LLC, et al.

Issue: Whether a national bank’s sale of consumer debt to a third-party debt collector is governed by the federal preemption doctrine of the National Bank Act (NBA).

Case Summary: The ABA, California Bankers Association, and the Independent Community Bankers of America (collectively Amici) filed an amicus brief supporting Midland Funding, LLC’s (Midland) petition for a rehearing of a Second Circuit decision that held the preemption doctrine of the National Bank Act does not extend to a purchaser of charged-off debts from a national bank that claims the preemption of state usury laws.

Plaintiff Saliha Madden brought the class action alleging that Midland, which purchased charged-off credit card debt from Bank of America, violated the Fair Debt Collection Practices Act by engaging in abusive and unfair collection practices in charging interest that was usurious under New York state law. The district court ruled that the NBA preempted plaintiffs’ state-law usury claims, but on appeal, the Second Circuit reversed. The panel for the Second Circuit ruled that because Midland is not a national bank or acting on behalf of a national bank, Midland cannot claim preemption of state usury laws under the NBA.

Amici filed a brief in support of Midland’s petition for a panel rehearing. First, Amici argued that the panel decision narrowly focused on the fact that Midland is not a national bank and overlooked “the exercise of a national bank’s powers” to make and sell loans under the NBA without obstruction of state usury laws. Second, Amici argued that impairing a national bank’s power to sell loans in the secondary debt market would have harmful ripple effects for loan originations, consumers and the economy by undermining the liquidity and efficiency of a national banks credit assets. Finally, Amici argued that the panel decision is misguided because NBA preemption extends to entities beyond a national bank itself.

Bottom Line: Many were surprised that the Office of the Comptroller of the Currency elected not to challenge the decision.

About Thomas Pinder

Thomas Pinder
Thomas Pinder is senior vice president and senior counsel for litigation in the office of ABA's general counsel.
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