A legal battle that has lasted nearly eight years and has gone up and down the legal ladder appears to be one step closer to ending, with both sides agreeing to a settlement that is awaiting approval from a District Court judge in New York.
Under the terms of the proposed settlement in Madden v. Midland Funding, the defendant will pay $555,000 in monetary relief to the plaintiffs, and reduce their unpaid balances by $9.25 million, along with agreeing to comply with all laws and regulations regarding the collection of interest. A copy of the Memorandum of Law in Support of the Joint Motion for Preliminary Approval of Class Settlement can be accessed by clicking here.
The plaintiffs originally filed suit, alleging that the defendant violated state usury laws when it continued to charge the same interest rate on an unpaid credit card debt that was charged by the original creditor. However, the original creditor was a national bank and was exempt from following state usury laws. The plaintiffs alleged that the defendant should not enjoy the same pre-emption as the original creditor.
The case was argued all the way up to the Supreme Court, which declined to hear arguments in the case. As well, Congress sought to enact legislation that would codify the “valid when made” doctrine, which ensures that loans remain valid after they are sold or transferred.
Based on an anticipated claims rate of between 10% and 20%, plaintiffs in the suit will likely receive between $58 and $116 each, according to the terms of the proposed settlement. Class members who opt to have their balances reduced could see reductions of between $1,920 and $5,250. About 60% of the class members have balances under $5,000, which could mean that many of those individuals will have their entire debts extinguished under the proposed terms.
