Compliance Bulletin

Federal Court of Appeal Disallows Non-Bank Assignee of a National Bank’s Credit Card Portfolio From Invoking the National Bank Act
June 8, 2015

In a decision recently issued by the federal Second Circuit Court of Appeal (Madden v. Midland Funding, LLC) a non-bank entity that acquired a national bank’s portfolio of delinquent credit card loans was not allowed to rely on defenses under the National Bank Act that would be available to the national bank. The assignee was sued for violating the state of New York’s usury law even though the national bank had originated the credit card accounts subject in part to the laws of Delaware, which permits banks to charge interest rates that would be usurious under New York law. The decision appears to conflict with other federal circuit court decisions. See CBA’s Regulatory Compliance Bulletin for more information.