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Ninth Circuit Holds Tribal Lending Entities Must Comply With CFPB Investigations

The United States Court of Appeals for the Ninth Circuit recently upheld a district court ruling that three lending institutions located on Native American reservations are required to comply with CFPB investigative demands, including subpoenas.

As background, the three lending institutions (the “Tribal Lending Entities”) are located on reservations and were created by the Chippewa Cree, Tunica Biloxi,and Otoe Missouria Tribes (the “Tribes”). The Tribal Lending Entities issue small-dollar payday loans. The CFPB began an investigation to determine whether the Tribal Lending Entities violated federal consumer financial protection laws. The Tribes instructed the Tribal Lending Entities not to comply or respond to the CFPB’s investigative demands, claiming Tribal sovereign immunity. The Tribes told the CFPB that it did not have jurisdiction to investigate the lending entities they had created, but offered to cooperate with the CFPB in its investigation as co-regulators of the entities. The CFPB declined, and when the Tribal Lending Entities refused to comply with its investigative demands, the CFPB sought enforcement in federal court.

The Tribal Lending Entities contended that the Consumer Financial Protection Act (the “Act”) did not give the CFPB jurisdiction over them. They argued that the Act limited the CFPB’s authority to “persons, and tribal entities are not included in the definition of person because the Act includes tribes in the definition of ‘State.’” The Tribal Lending Entities further argued that since the law treats states and tribes as co-regulators, Congress did not intend to give the CFPB jurisdiction to regulate tribal entities without the cooperation of the tribal regulators.

The Ninth Circuit panel found that the Act is a law of general applicability. Laws of general applicability govern tribal entities unless Congress expressly provides otherwise, subject to three exceptions: 1) laws that would touch the tribes’ exclusive rights of self-governance in purely internal matters; 2) laws that would abrogate rights guaranteed by treaties; or 3) when there is evidence through legislative history or otherwise that Congress did not intend the law to apply to Native American tribes.

The first exception did not apply because the matter was not purely internal; the Tribal Lending Entities offered small-dollar loans over the internet to consumers who were not Tribal members or located on Tribal lands. The Tribal Lending Entities did not argue that the second exception applied. The third exception did not apply because the Tribal Entities did not present sufficient evidence that Congress did not intend for the law to apply to Native American tribes. Based on this analysis, the Ninth Circuit upheld the district court’s order enforcing the CFPB’s investigative demands to the Tribal Lending Entities.

The Ninth Circuit panel opinion in the case is available here: http://cdn.ca9.uscourts.gov/datastore/opinions/2017/01/20/14-55900.pdf.