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CFPB denies petition by tribal payday lenders to set aside CIDs

Posted in CFPB Enforcement, Payday Lending

On September 26, the CFPB issued a 10-page order denying a petition filed jointly by three tribal payday lenders that asked the CFPB to set aside the civil investigative demands (CIDs) the lenders received from the CFPB.  The order describes the lenders as “limited liability companies organized and chartered under the laws of federally recognized Indian tribes,” with each lender “created by resolution of its respective tribe in or about 2011″ and “wholly owned by that tribe.” 

In the order, the CFPB rejects the lenders’ argument that they are not subject to the CFPB’s CID authority because they are affiliated with, and “arms” of, Indian tribes.  According to the CFPB,  the lenders failed to show that the CFPB’s attempt to apply the Consumer Financial Protection Act (Title X of Dodd-Frank) to them fell within an exception to the general rule that tribes and tribally-affiliated entities are subject to federal laws of general applicability.  The CFPB also rejected the lenders’ argument that tribal sovereign immunity protected them from the CIDs on the grounds that neither Indian tribes nor purported “arms” of tribes have sovereign immunity against suits by the federal government. 

The lenders had also argued that the CIDs should be set aside because they did not provide adequate notice of the purpose and scope of the CFPB’s investigation and made requests that were “vague, overly broad, and unduly burdensome.”  While the CFPB found these claims to be “baseless,” it indicated that the lenders were “welcome to continue to discuss, and to seek to resolve, issues about the scope and burden of individual interrogatories and document requests with the Bureau’s enforcement team.”  The order directs the lenders to produce  all responsive documents, items and information covered by the CIDs within 21 days.