U.S. Rep. McHenry Proposes Bill to Counteract Court Ruling in Madden v. Midland

On Monday, July 11th, Representative Patrick McHenry (R-NC) introduced a bill entitled “Protecting Consumers’ Access to Credit Act of 2016” (H.R. 5724).

“Innovation in financial services has created more convenient and secure ways to meet the demands of American consumers," said McHenry. "For these to succeed, however, Washington must rethink its own laws and regulations to keep up with the growth and creativity in the private sector.”

According to a recent Wall Street Journal article, the bill calls for allowing debt buyers, including marketplace lenders, to charge the same interest rate as the banks that originated the debt.

The Supreme Court previously denied certiorari in Madden vs. Midland Funding. (Please see here for the amicus curiae brief SFIG had submitted in support of the cert petitioners in the case.) 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.

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@sfindustry.org.

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