Many states, including Tennessee, have laws in place called usury laws, which set forth maximum interest rates that can be charged on loans between private parties. However, certain lenders, such as banks and other loan companies, are exempt from these limitations on interest. Often times, banks sell debts to debt collection companies, which then pursue payment from the borrower.
One borrower filed a class action lawsuit against one of these debt collection agencies, arguing that the annual interest rate of 27 percent the agency was charging her was in violation of her state’s usury laws. In this case, her debt originated with a credit card issued by Bank of America, and was somehow acquired by the defendant. The collection company countered that it should be granted the same usury law exemptions that banks are entitled to under the National Bank Act.
The U.S Court of Appeals for the Second Circuit ruled that the debt collector could not be afforded the same protections that national banks receive as a third party debt collector. The U.S. Supreme Court recently declined to hear the debt agency’s claims as to why it should legally be treated the same as a bank. As such, the woman’s class-action lawsuit will be able to go forward.
Credit card debt can create several challenges for those who find themselves unable to pay back the balances. However, they should know that they still have options. Borrowers who are experiencing problems with debt may wish to consult an attorney experienced in these matters.
Source: Reuters, “Supreme Court lets debt collection class-action suite proceed,” Lawrence Hurley, June 27, 2016