U.S. Supreme Court To Consider "Valid When Made" Doctrine

Last year, the influential Second Circuit Court of Appeals handed down a troubling, and to many banking lawyers, plainly-wrong decision in Madden v. Midland Funding LLC.¹ In that case, Midland had bought a credit card debt originated by a Delaware national bank, attempted to enforce the debt against the borrower, and apply the 27% interest rate under the credit card agreement. However, the borrower was a New York citizen, and the rate charged exceeded the New York criminal usury rate of 25%. Even though the originating lender was a national bank, the Second Circuit held that the national bank's debt buyer could not rely on the National Bank Act preemption of state usury law.² The case is a departure from years of precedent, it creates a circuit split, and the debt buyer has asked the United States Supreme Court to review the decision.³