Bank Partnership Litigation In Focus in Pennsylvania Court

Investors and participants in bank partnership programs – through which an FDIC-insured bank partners with a nonbank that acts as marketer, and, sometimes, purchaser or servicer of the bank-originated loans – have been eagerly awaiting U.S. Supreme Court action in Madden v. Midland Funding, in which the U.S. Court of Appeals for the Second Circuit held that non-national bank entities that purchase loans originated by national banks cannot rely on the National Bank Act to protect them from state-law usury claims.  Participants in this space have also been closely monitoring pending litigation for any cases that may affect the bank partnership space. Now, in Commonwealth of Pennsylvania v. Think Finance, the U.S. District Court for the Eastern District of Pennsylvania has raised eyebrows when it declined to dismiss claims of usury against  the nonbank servicing partners of a federal bank.     Continue reading “Bank Partnership Litigation In Focus in Pennsylvania Court”


FDIC Discusses Marketplace Lending

The Federal Deposit Insurance Corporation discusses marketplace lending in its Winter 2015 issue of Supervisory Insights, offering guidance to participants in the bank partnership space. The FDIC walks through factors a bank should examine before entering into a partnership with a nonbank entity. Banks are directed to consider the partner’s compliance with applicable federal law, consumer protection requirements, anti-money laundering rules and fair credit obligations, as well as applicable state laws such as licensing or registrations necessary to engage in the partnership. The FDIC also poses questions for the bank’s consideration to determine whether the partnership will meet the FDIC’s safety and soundness requirements: Continue reading “FDIC Discusses Marketplace Lending”

Asset Purchase or Consumer Loan: One State High Court Weighs In

In a case closely watched by players in the asset purchase space, the Colorado Supreme Court ruled that the purchase of a future interest in the litigation proceeds of a tort lawsuit – usually automobile accidents, slip and falls, construction site injuries and medical malpractice – constituted a loan subject to that state’s consumer credit laws.  Selling an interest in the potential proceeds of personal injury cases is not new. The Purchaser pays the Seller, who is a plaintiff in a tort lawsuit, money in exchange for the right to receive a  portion of the proceeds of litigation.  Although the Colorado case touches on the form of the transaction in the merchant cash advance space, the applicability of the decision to such transactions seems limited to consumer transactions. Continue reading “Asset Purchase or Consumer Loan: One State High Court Weighs In”