Providing Debt Relief for Clients Throughout the State of New York

A district court judge certified a new class-action lawsuit against Midland Funding LLC.

A district court judge certified a new class-action lawsuit against Midland Funding LLC. The suit alleges that Midland violated New York usury laws by charging thousands of struggling borrowers interest rates above 25 percent when trying to collect on debts owed. Midland Funding LLC is in the business of purchasing defaulted debts and is owned by Encore Capital Group, Inc one of the biggest debt buyers in the country.

Plaintiff, Saliha Madden, received a cardholder agreement for her Bank of America card in 2005, which provided that it was governed by applicable Arizona and federal law. This agreement was replaced by a Change in Terms in 2006 that provided that “This Agreement is governed by the laws of the State of Delaware and by any applicable federal laws. The debt owed was sold to Midland Funding LLC in November 2010. Midland sued Ms. Madden in 2011, which has subsequently been dismissed.

In her decision, the federal judge noted that there was a “heavy burden” on the plaintiffs to demonstrate that the foreign law is offensive to New York’s public policy stating that “it must be demonstrated that the applicable foreign law would violate some fundamental principle of justice, some prevalent conception of good morals.” She concluded here that New York has a “fundamental public policy” against interest rates exceeding 25 percent. She further stated that the state’s usury laws purposefully prevent creditors from collecting a higher rate on defaulted debts. High interest rates are a topic of concern among regulators in the debt collection business. Many have argued that high interest rates can trap borrowers in endless debt cycles.

The Court certified injunctive and declaratory relief to a class comprising of all persons residing in New York who were sent a letter by the Defendants attempting to collect interest in excess of 25% and whose cardholder agreements purported to be governed by the law of a state, like Delaware’s, provides for no usury cap; or select no law other than New York.