489 F.Supp.3d 33
E.D.N.Y.2020Background
- Plaintiffs are New York residents who paid credit-card interest rates (22.5%–27.74%) on Capital One–issued accounts and sued non-bank securitization parties (CO Funding, COMT, COMET, BONY as trustee), alleging violations of New York usury law and unjust enrichment.
- Capital One (a national bank chartered in Virginia) originated and continued to own and service the underlying accounts; receivables were sold/transferred through a receivables purchase agreement, a pooling and servicing agreement, and a prospectus used in securitizations.
- Defendants (non-bank special-purpose entities) collected receivables and issued asset-backed securities; they do not set account terms or interest rates.
- Defendants moved to dismiss under Fed. R. Civ. P. 12(b)(6), asserting that the National Bank Act (NBA) and Dodd–Frank preempt New York usury law because Capital One may export Virginia interest rules, and alternatively invoking the “valid‑when‑made” doctrine.
- The court considered the PSA, RPA, and Prospectus as integral to the complaint and took judicial notice of Capital One’s national‑bank status; it concluded applying New York usury law to the securitized receivables would significantly interfere with Capital One’s NBA powers.
- Result: the court dismissed the amended complaint with prejudice, holding the usury claim preempted and the unjust‑enrichment claim duplicative and therefore failing, and declined to address the valid‑when‑made issue as moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether New York usury law applies to defendants' collection of receivables | Usury claims against non‑bank collectors survive; non‑party Capital One status irrelevant at pleading stage; Madden protects plaintiffs | NBA preempts state usury claims because Capital One (a national bank) originated/controls accounts and may export Virginia rates; applying NY law would significantly interfere with bank powers | NBA preempts Plaintiffs' usury claim against these defendants because Capital One retained control of accounts and state law would significantly interfere with its NBA powers (dismissal granted) |
| Whether Madden v. Midland requires denial of preemption | Madden held debt buyers who purchased accounts outright are not entitled to NBA preemption; Plaintiffs say Madden is controlling | Defendants say Madden is distinguishable because in Madden the banks divested accounts; here Capital One retained ownership and servicing control | Court found Madden distinguishable and supportive of dismissal where the originator retained ongoing control; Madden does not bar preemption here |
| Whether the court may consider securitization documents and Capital One’s status on a 12(b)(6) motion | Plaintiffs urged limiting consideration to complaint text | Defendants relied on Prospectus/PSA/RPA and OCC records | Court treated those documents as integral and judicially noticed Capital One’s OCC conversion; consideration at pleading stage was appropriate |
| Valid‑when‑made doctrine (raised by defendants) | Plaintiffs argued other doctrines/control issues may apply | Defendants invoked valid‑when‑made to defend transferred receivables | Court declined to decide as moot because NBA preemption resolved the case |
| Unjust enrichment claim duplicative of usury claim | Plaintiffs asserted unjust enrichment based on excess interest payments | Defendants argued duplicative and preempted if usury claim is preempted | Court dismissed unjust enrichment as derivative/duplicative of the preempted usury claim |
Key Cases Cited
- Madden v. Midland Funding, LLC, 786 F.3d 246 (2d Cir. 2015) (non‑bank debt buyer that purchased accounts outright may not invoke NBA preemption)
- Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25 (1996) (state law preemption test: state law that prevents or significantly interferes with national bank powers is preempted)
- Beneficial Nat’l Bank v. Anderson, 539 U.S. 1 (2003) (NBA §§85–86 provide exclusive remedy for usury claims against national banks)
- Marquette Nat. Bank v. First of Omaha Serv. Corp., 439 U.S. 299 (1978) (national banks may charge interest permitted by home‑state law to out‑of‑state borrowers)
- Pac. Capital Bank, N.A. v. Connecticut, 542 F.3d 341 (2d Cir. 2008) (NBA preemption bars a state from requiring a national bank to charge lower interest than allowed by its home state)
- Krispin v. May Dept. Stores Co., 218 F.3d 919 (8th Cir. 2000) (look to the originating entity’s continuing relationship with accounts when assessing preemption)
- Phipps v. FDIC, 417 F.3d 1006 (8th Cir. 2005) (NBA can preempt state law challenges when the national bank is the entity charging the contested interest)