June 27, 2016 Alert - Supreme Court Denies Madden’s Cert Petition
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June 27, 2016


Today, June 27, 2016, the Supreme Court denied certiorari in Madden v. Midland Funding. As a result, the Second Court's decision still stands in its covered states of New York, Vermont and Connecticut.

“The Supreme Court’s decision today not to review the Second Circuit's decision in Madden v. Midland Funding lets stand a flawed decision that ignores plain legal precedent and straightforward common sense. Delivering credit to consumers is a system that relies on clarity and predictability. The Second Circuit's decision overlooks a core legal tenet that anchors a multi-trillion dollar market and will result in significant challenges for every day consumers of credit cards, mortgages, auto loans and many other common forms of credit in the real economy. Even the Administration agreed, in its brief to the Supreme Court, that the Second Circuit had failed to apply binding legal precedent and had wrongly decided the case. By refusing to grant review now, the Supreme Court is prolonging the uncertainty over whether and when the Madden decision will be overruled or limited to its facts. The market is already moving quickly to respond to this uncertainty and evaluating or putting in motion plans that may include exiting products and markets. The end result is clear. This action will reduce the overall availability of credit to consumers, particularly low income consumers. The injection of uncertainty into the credit markets will ultimately increase the cost of credit for all and directly impact the real economy.”  - Richard Johns, Executive Director, SFIG


Last month, on May 24th, the U.S. Office of the Solicitor General filed its brief to the Supreme Court, in response to the Court’s request for the views of the United States on whether the case should be heard.

The Solicitor General recommended that the petition for a writ of certiorari be denied. However, the brief does indicate that the Second Circuit decision was decided incorrectly, and that under the National Bank Act an assignee of a loan from a national bank can continue to charge the interest rate on the loan.

The Supreme Court's denial of certiorari has far reaching implications for the securitization of consumer loans, especially those funded through marketplace lending channels. Industry participants will need to evaluate the applicability of state usury laws for loans included in a securitization. Additionally, demand in the secondary market for marketplace loans above state interest rate caps in the Second Circuit is expected to remain modest given potential legal risks.

SFIG previously submitted an amicus curiae brief in support of the petitioners in the case.

If you are interested in learning more about SFIG’s advocacy on this matter, or if you would like to join the Marketplace Lending Committee, please contact Jennifer Wolfe or Alyssa Acevedo.

Structured Finance Industry Group
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