A California federal court recently issued an order granting the CFPB’s petition to enforce its civil investigative demands (CIDs) issued to three tribally-affiliated payday lenders. However, the court also granted the lenders’ request for a stay pending their appeal to the Ninth Circuit. Although the CFPB did not oppose the stay, the court nevertheless found that if its decision was wrong, the lenders were likely to suffer irreparable harm because of the disclosure of sensitive proprietary documents to the CFPB whereas the CFPB would not be injured by a temporary delay.
The court rejected the lenders’ argument that, as arms of sovereign tribes, they were “sovereigns” and therefore were not “persons” to whom the CFPB can issue CIDs under the Consumer Financial Protection Act (CFPA). According to the court, controlling Ninth Circuit precedent established the rule that laws of general applicability such as the CFPA are presumed to apply with equal force to Indian tribes. Such precedent also recognized three exceptions to the rule where (1) applying the law would interfere with a tribe’s right of self-governance on purely internal matters, (2) applying the law would abrogate treaty rights, or (3) there is proof that Congress intended to exempt tribes. The court found that the lenders could not show that any of the exceptions applied.
The court also rejected the lenders’ argument that the CIDs were barred by tribal sovereign immunity because, in its view, settled Ninth Circuit law provided that sovereign immunity did not bar a suit by a federal agency even when Congress has not specifically abrogated tribal immunity. The lenders’ were also unsuccessful in their attempt to have the CIDs invalidated on the grounds that they did not provide adequate notice of the purpose and scope of the CFPB’s investigation, demanded evidence beyond the scope of any possible violation, and were overbroad or unduly burdensome.