Secondary Loan Markets Post-Madden: Overcoming Restrictions in Future Loan Transactions and Secondary Market Sales

This CLE course will provide strategies for counsel to banks, marketplace lenders, loan buyers, securitizers and other secondary market participants on originating loans, structuring loan sales and defending interest rate and other claims to avoid the impact of the Madden decision, which limits interest rates charged by purchasers of loans in the secondary market.

The U.S. Supreme Court denied cert in the Second Circuit’s Madden v. Midland Funding decision, letting stand a ruling that an assignee of consumer loans originated by a national bank cannot invoke federal preemption to defend against a state law usury claim. The decision bypasses the long-standing “valid when made” principle that lenders and secondary loan market participants have relied on to charge interest rates as high as those permitted by the originating bank’s jurisdiction.

As a result of Madden, national banks and marketplace lenders need to consider how to export interest rates when they sell loans originated in the Second Circuit. The fallout from the decision is expected to reach beyond the Circuit to national banks across the country and leaves a great deal of uncertainty for all players involved in secondary loan market transactions. The decision has already prompted class action lawsuits by both marketplace lending shareholders and borrowers.

Counsel representing banks as well as secondary market participants must become well versed in tactics to weather the impact of this decision on pre-Madden debt and provide financial clients with tools to mitigate negative effects on future loan transactions and secondary market sales.

Listen as our authoritative panel provides strategies for originating loans and structuring loan sales to circumvent the effect of Madden as well as valid defenses that can be asserted by marketplace lenders and secondary market loan purchasers to defeat claims by consumers and investors attempting to rely upon Madden.