U.S. District Court Ruling Raises Important Considerations for Debt Origination and Collection in New York: U.S. District Court Rules That New York’s Fundamental Public Policy Against Usury Overrides a Delaware Choice of Law Provision, and Thus Allows a Class Action to Proceed Against a Debt Collector for Unfair Collection Practices

Sullivan & Cromwell LLP - March 2, 2017
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On February 27, 2017, the U.S. District Court for the Southern District of New York issued an opinion in Madden v. Midland Funding, LLC holding that New York’s fundamental public policy against usury overrides provisions in a credit card agreement specifying that the debt was governed by the law of another State—in this case, Delaware, which had no relevant usury caps.  Accordingly, the District Court allowed the plaintiff-debtor to proceed to trial with class action claims against the defendant-debt collector under the Fair Debt Collection Practices Act on the grounds that the defendant was seeking to collect impermissibly high interest rates, although claims based on a usury violation itself were denied.