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Using Usury to Usurp Debt Collectors

A great ruling came down from the northeast recently, directly effecting New York, Connecticut and Vermont, a decision which we hope will make its way down to Florida eventually. The decision will help to hold debt collectors liable for gouging consumers with ridiculous interest rates. There is a legal limit on how much interest can be charged for certain kinds of loans in Florida. Pursuant to Florida Statutes §687.03(1), it is against the law to charge more than 18% simple interest per year for a non-commercial loan.

Credit card companies sometimes charge interest rates as high as 29%. Unfortunately, the large credit card companies can get away with it because Federal law exempts national banks and certain other large financial institutions from state laws limiting interest rates. While there are a handful of exceptions, most of the companies which the typical consumer would borrow money from are exempt from state usury laws.

What about debt buyers who buy debts from credit card companies and then sue our clients? Debt buyers are not national banks.

We have been arguing to judges that even if a debt buyer bought a debt from a national bank, they are not a national bank themselves and therefore should not be able to charge excessive and unlawful interest. A high level court in New York, the Second Circuit Court of Appeals recently ruled just that in the case of Madden v. Midland Funding, LLC, deciding that since the national bank no longer had any interest in the loan, the exemption disappeared. This also meant that Midland may have violated consumer protection laws by trying to collect an uncollectable debt and may be liable to a consumer under the Fair Debt Collection Practices Act.

This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please consult your attorney in connection with any legal issues related to the matters discussed in this article as the applicability of state, local and federal laws may vary.