US Supreme Court Allows Class Action Lawsuit against Debt Collector to Go Forward

The United States Supreme Court recently struck a blow against unethical and abusive creditors by allowing a class action lawsuit against a debt collector to go forward.

The class action suit was initially filed by Saliha Madden, a NY borrower who was joined in the lawsuit by other debtors who objected to Encore Capital Group’s annual interest rate of 27 percent on debts. Madden owed approximately $5,000 in credit card debt that she had accumulated with Bank of America several years earlier. After Encore Capital Group purchased the debt from Bank of America, the debt collection company sought to impose the exorbitant interest rate on Madden. Madden and the other debtors in the class action lawsuit claimed that Encore Capital had violated the federal Fair Debt Collection Practices Act by charging the excessive interest rates on their debts.

In May 2015, the 2nd US Circuit Court of Appeals in New York ruled that Encore Capital Group had gouged debtors, in violation of state usury laws, by allowing its subsidiaries to lend money at unreasonably high interest rates. The federal circuit appellate court specifically declared that Midland Funding and Midland Credit Management, two sub-units of Encore Capital, were not considered “national banks” and therefore should not be immune to usury laws that govern the total amount of interest that can be charged on a loan.

Protecting Consumers against Creditor Abuse and Harassment

Usury laws exist to ensure that debtors who are already struggling to get by during difficult financial situations are not taken advantage of by creditors, “loan sharks” or anyone else who might look to charge high amounts of interest. State laws against usury are meant to protect debtors and consumers by setting caps, or maximum amounts, on the interest that can be charged. These types of laws ensure that debtors are not subject to money lending at unreasonably high rates.

Now the U.S. Supreme Court has weighed in on this sort of behavior by creditors and debt collection agencies by declaring that the aggrieved debtors in the Encore Capital Group case can proceed with their class action lawsuit against the debt collector. The Supreme Court justices declined to hear Encore Capital Group’s claim that their sub-units should be classified as national banks that afforded legal protection against usury laws. In issuing this ruling, the US Supreme Court is very clearly emphasizing that it is debtors who need strong legal protections in these kinds of cases, not creditors.

For more information about this debt collection case, read the article, “Supreme Court Lets Debt Collection Class-Action Suit Proceed.”


If you are struggling with debt and are dealing with creditors, you should speak with a qualified bankruptcy and debt management attorney as soon as possible. Joel R. Spivack is an experienced debt relief lawyer who will help you explore your legal options and protect your rights. Contact Mr. Spivack now to schedule a free consultation about your case.

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Attorney Joel R. Spivack is an experienced bankruptcy and residential real estate transactions lawyer in Cherry Hill, New Jersey. Clients come to us for legal services, but what we really provide is peace of mind. For more than 30 years, Attorney Spivack has helped people make wise, informed decisions about bankruptcy filings, debt relief options and residential real estate transactions.
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