The Supreme Court declined yesterday to hear a case that could undermine the ability of some lenders to charge high interest rates, the New York Times reported today. The decision not to review a ruling by the U.S. Court of Appeals for the Second Circuit keeps intact a decision that directly affects only a narrow slice of the finance industry, namely debt collectors. But banking lawyers and lobbyists say the case, if applied more broadly, could wreak havoc on credit cards, student loans and other types of consumer lending. The case involves the National Bank Act that exempts national banks from various state laws limiting the interest rates lenders can charge. The federal law allows banks to follow the usury laws of whichever state they are in and then “export” that rate to borrowers living in other states. Unsurprisingly, many banks have located their lending operations in states that permit lenders to charge the highest rates. In this case, the Second Circuit ruled in May 2015 that when the debt collector, Midland Funding, bought soured loans from Bank of America, it was not exempt from state interest rate caps, known as usury laws. Because Midland is not a bank, the company does not qualify for exemption from various state usury laws, the appeals court ruled. The borrower in the case, Saliha Madden, argued that Midland could not collect the 27 percent interest rate on her credit card because it exceeded the rate caps in her home state, New York.
