Tribal Lenders File Opposition to CFPB’s Motion to Enforce Civil Investigative Demand


Resisting the CFPB’s enforcement petition filed in the United States District Court for the Central District of California, as they resisted the petition in proceedings before the CFPB (see October 1, 2013 Alert) , a group of tribally-affiliated lenders filed their opposition to the CFPB’s petition claiming exemption from CFPB jurisdiction under the Dodd-Frank Act (see April 15, 2014 Alert discussing CFPB’s petition). In their opposition memorandum, the lenders argued that the Dodd-Frank Act confers CFPB jurisdiction only to “persons”, not to sovereign tribes or tribal arms. Citing case law recognizing tribally-operated casinos as arms of a tribe, the lenders argued that they are likewise an extension of the tribe that operates them, and are therefore not “persons” under the Dodd-Frank Act, but rather are “sovereign co-regulators”. Challenging the CFPB’s argument that even tribal entities can be regulated by Congress when the law is of “general applicability”, the lenders argued that principle does not apply because the Dodd Frank Act specifically recognizes that the CFPB cannot regulate tribes. This is a similar argument made, and rejected by a Nevada federal court, by other lenders in an action brought by the FTC (see April 1, 2014 Alert). Finally, the tribally-affiliated lenders argued that sovereign immunity precluded the civil investigative demand, and that the civil investigative demand was vague and indefinite such that it failed to provide adequate notice.

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, Dodd-Frank, Exemptions, Jurisdiction, Payday Loans, Tribal Loans

Published In: Business Torts Updates, Civil Procedure 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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