## Facts

- Saliha Madden, a New York resident, opened a credit card account in 2005 with Bank of America, a national bank; the account later became associated with FIA Card Services, N.A., also a national bank.
- The cardholder agreement and later change-in-terms materials included a Delaware choice-of-law clause.
- By 2008, Madden owed about $5,000; FIA charged off the account and sold the debt to Midland Funding, LLC, a non-bank debt purchaser.
- Midland Credit Management, Inc., also a non-bank entity, serviced and collected the account for Midland Funding.
- In 2010, Midland sent a collection letter stating a 27% annual interest rate applied.
- Madden alleged the 27% rate exceeded New York’s 25% cap for the relevant debt, making the collection effort usurious under New York law.
- Madden sued under New York usury law and the FDCPA, alleging collection of usurious interest was deceptive and unfair.
- The district court granted summary judgment to Midland, holding the National Bank Act (NBA) preempted the state-law usury theory (and FDCPA claims predicated on it), and denied class certification based on the same preemption view.

## Issues

1. Whether the NBA preempts application of New York usury law (and FDCPA claims predicated on that law) to non-bank debt purchasers that bought charged-off credit-card debt from a national bank.
2. Whether a Delaware choice-of-law clause barred reliance on New York usury law (reserved for remand).
3. Whether denial of class certification could stand where it was premised on the district court’s NBA preemption analysis.

## Decision

- The Second Circuit reversed the district court’s preemption ruling and vacated the judgment for Midland.
- The court held the NBA did not preempt Madden’s New York usury and derivative FDCPA claims against Midland because Midland was neither a national bank nor acting on behalf of one, and applying New York law would not significantly interfere with a national bank’s powers.
- The court vacated the denial of class certification because it rested on the same erroneous preemption analysis.
- The case was remanded for further proceedings, including consideration of whether the Delaware choice-of-law clause foreclosed Madden’s New York-law theory.

## Legal Principles

- NBA preemption is tied to protecting a national bank’s exercise of federally granted powers; it does not automatically extend to any subsequent purchaser of a national bank’s debt.
- A non-bank defendant seeking NBA preemption must show, at minimum, that applying state law to the defendant would significantly interfere with a national bank’s exercise of its powers; the absence of an ongoing bank role (such as agency, ownership, or servicing by the bank) weighs against preemption.
- Where a national bank has sold an account outright and the purchaser collects for its own account, applying state usury limits to the purchaser does not necessarily burden any national bank power under the “significant interference” standard.
- FDCPA claims premised on an alleged state-law usury violation are not preempted where the underlying state usury law is not preempted as applied to the non-bank collector.

## Conclusion

The Second Circuit held that NBA usury preemption did not shield non-bank debt buyers collecting on charged-off accounts they purchased from national banks, vacated summary judgment and the class-certification denial that depended on that preemption theory, and remanded for further proceedings including unresolved choice-of-law questions.


Madden v. Midland Funding, LLC, 786 F.3d 246 (2d Cir. 2015)