Jul 21, 2020
In the inaugural episode of Cadwalader's LawWise podcast, partners Doug Gansler and Rachel Rodman are joined by Ben Wiseman, Director, Office of Consumer Protection at the Office of the Attorney General for the District of Columbia, to discuss the “true lender” doctrine, the Madden decision, and potential regulatory and enforcement considerations for online lenders.
In response to the rise of online and marketplace lending, consumers and government agencies have challenged the authority of these companies to collect interest at rates that exceed state law usury limits. These challenges typically raise two issues. First, who is the “true lender” of the loan—the bank, with whom the online lender partners and is permitted to export its home state rate of interest, or the online lender? Second, will the court follow the Second Circuit’s decision in Madden v. Midland Funding, LLC? In Madden, the court held that the application of state usury laws to third-party assignees (such as online lenders) is not preempted by the National Bank Act, but rather such assignees remain subject to state usury limits.
As the former Attorney General of Maryland, Doug provides background on these issues from a State AG perspective. Rachel, a former senior official at the Consumer Financial Protection Bureau, outlines the role of the CFPB in these enforcement matters.