CFPB Denies Payday Lender’s Petition to Set Aside Civil Investigative Demand


The CFPB denied two online payday lenders’ petition to set aside a civil investigative demand. The lenders claimed they are chartered under the laws of federally recognized Indian tribes and therefore, the CFPB’s investigation did not meet the first prong of the test established in the CFPB’s first order denying a petition to set aside a civil investigative demand—that the investigation was for a lawfully authorized purpose (see October 2, 2012 Alert).

In denying the petition, the CFPB noted that the Consumer Financial Protection Act provided it the authority to issue civil investigative demands to tribally-affiliated lenders. The CFPB further analyzed its authority over tribal lenders using the general rule established in FPC v. Tuscarora Indian Nation, 362 U.S. 99, 116 (1960) (Supreme Court established general rule that a general statute applying to all persons includes Indians and their property interest) and the exceptions to the rule established in Donovan v. Coeur d’Alene Tribal Farm, 751 F.2d 1113 (9th Cir. 1985). Ultimately, the CFPB concluded that none of the exceptions in Coeur d’Alene apply, the general rule in Tuscarora controlled and therefore, the CFPA applied to tribally-affiliated lenders. The CFPB also rejected the lenders’ argument that civil investigative demands did not provide adequate notice of the purpose and scope of the investigation and made vague and overly broad requests as “baseless.” The CFPB, however, did invite the lenders to “continue to discuss, and seek to resolve, issues about the scope and burden of individual interrogatories and document requests with the [CFPB] enforcement team.” The ruling serves as a caution to future parties of the importance of meeting and conferring with the CFPB prior to challenging CIDs. In the CFPB’s first denial of a petition to set aside a CID, the CFPB highlighted the company’s failure to make a “good faith effort” to negotiate the terms of the CID.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.


Topics:  CFPB, CID, Lenders, Payday Loans, Tribal Lands

Published In: Civil Procedure Updates, General Business Updates, Consumer Protection Updates, Finance & Banking Updates, Indigenous Peoples Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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