The Southern District of New York recently refused to enforce Delaware’s no-usury-cap rule in a long-running Fair Debt Collection Practices Act (“FDCPA”) class action, concluding that the rule violates New York public policy. See Madden v. Midland Funding, LLC, 2017 WL 758518 (S.D.N.Y. Feb. 27, 2017). In Madden, the plaintiff claimed that the defendants charged her an interest rate in excess of the limit imposed by New York law, triggering a violation of the FDCPA. The case has a long history. We first addressed the case in a client alert after the Second Circuit determined that National Bank Act preemption does not apply to debt purchased by independent, third parties. The United States Supreme Court declined to review the Second Circuit’s decision, a ruling about which we blogged.
On Monday, the United States Supreme Court decided not to review whether National Bank Act preemption, which provides national banks with a safe harbor from state usury laws, extends to third-parties that purchase and collect debt originated by national banks. The decision to deny certiorari in Midland Funding, LLC v. Madden, No. 15-610 (U.S. Nov. 10, 2015) (“Madden”), leaves intact a May 2015 decision of the Court of Appeals for the Second Circuit. The Second Circuit had ruled that National Bank Act preemption only applies to purchasers of national-bank-originated debt where the purchaser is a subsidiary or agent of, or is otherwise acting on behalf of, a national bank. (The K&L Gates alert regarding the Second Circuit decision can be found here.)
The U.S. Supreme Court has ruled that a California state court’s decision striking down a class action waiver in an arbitration agreement was an improper attempt to evade the Supreme Court’s 2011 landmark decision in AT&T Mobility LLC v. Concepcion. See DirecTV, Inc. v. Imburgia, 577 U.S. — (No. 14-462) (Dec. 14, 2015). Concepcion held that the Federal Arbitration Act (“FAA”) preempts state law to the extent it purports to bar the inclusion of class action waivers in arbitration agreements. Imburgia reiterates that holding and concludes that because the California court had interpreted the subject arbitration agreement in a manner “restricted to [the] field” of arbitration, as opposed to contracts generally, the interpretation could not withstand scrutiny under the FAA.
The New York Department of Financial Services (“DFS”) has updated its FAQ on the debt collection regulations that took effect on March 3, 2015. We analyzed the regulations in a client alert and covered an earlier version of the FAQ in a previous blog post.
Responding to industry questions about New York’s new debt collection regulations, most of which take effect on March 3, 2015, the Department of Financial Services has published a detailed FAQ on its website. We previously analyzed the regulations in a client alert.
As we anticipated in our alert, the FAQ confirms that “debt servicers, including companies that service student loans, home equity loans or mortgages … who collect or attempt to collect a debt that was not in default at the time it was obtained for collection are not” subject to the regulations. This parallels how the federal Fair Debt Collection Practices Act (“FDCPA”) is interpreted.
By: David L. Beam
The gift card provisions of the Electronic Funds Transfer Act (“EFTA”) and Regulation E (which implements the EFTA) do not allow funds on most gift cards to expire sooner than five years after issuance (or, if the card is reloadable, five years after the last load). But the unclaimed property laws in some states require gift card issuers to turn over the funds on dormant gift cards sooner than five years after the last activity. The state unclaimed property laws generally relieve the issuer of the obligation to honor a card after it has turned the funds over to the state. Instead, the owner of the card must apply to the state treasurer to recover the funds. (If the card issuer decides to honor the card anyway—and many do for customer service reasons—then the issuer may apply to the state for reimbursement.)
By: David L. Beam
Last Thursday, the California Supreme Court handed down what arguably is the most important decision on federal preemption for national banks since the Dodd-Frank Act was passed in mid-2010. The specific issue in Parks v. MBNA America Bank, N.A., 2012 Cal. LEXIS 5795 (Cal. June 21, 2012), was whether California could require national banks to place certain disclosures on credit card “convenience checks.” MBNA, the defendant, argued that the California law was preempted for national banks by the National Bank Act. The state court of appeals had disagreed. Read More