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WBK Industry News - Litigation Developments

OK Files Amicus Brief Supporting Dismissal of CFPB Tribal Lending Case

The state of Oklahoma filed a brief supporting dismissal of a CFPB complaint filed against four online lenders owned by a federally recognized Indian Tribe, claiming the CFPB was threatening the sovereignty of both states and Tribal Nations.  The primary argument made in Oklahoma’s brief was that the CFPB did not have jurisdiction to regulate or investigate state regulatory agencies, or independent Tribal sovereignties.

As we previously covered, in April 2017, the CFPB filed a lawsuit alleging four online lenders collected and attempted to collect loans that are void under state law, and failed to disclose annual percentage rates.  Specifically, the loans allegedly range from $300-$1200; were typically repaid via 20 installment payments over the course of 10 months; and for each installment payment, borrowers were allegedly charged a “service fee,” which was typically 30% of the principal outstanding, plus 5% of the original principal balance.

Oklahoma’s amicus brief—a type of brief filed by non-litigants that may have an interest in the subject matter of the litigation—first tracked constitutional arguments made in the PHH case, stating the “very existence” of the CFPB represents a serious violation of the “separation of the powers of the federal government.”  But the amicus brief also focused on the CFPB’s jurisdiction over states and sovereign Tribes, claiming that “Oklahoma now faces the prospect of the CFPB . . . asserting jurisdiction over States and their agencies without clear congressional authorization.”  In support of this position, Oklahoma relied on the text of the Consumer Financial Protection Act, arguing that “State[s]” are to be co-regulators with the CFPB.  Oklahoma also cited theoretical concerns with the CFPB potentially sending civil investigative demands to state agencies, citing a brief filed by the CFPB in another case which asserted that “states and state-owned companies are neither exempt from the regulation under the CFPA, nor exempt from complying with the Bureau’s CID’s.”

Putting the theoretical concerns aside, Oklahoma’s motivation for filing the amicus brief is not entirely clear from the brief itself.  The case was originally filed in Illinois, and has since been transferred to the Federal District Court of Kansas.  Nonetheless, Oklahoma is home to several dozen federally recognized Indian Tribes, and the state clearly has an interest in how the CFPB might pursue enforcement actions against a Tribe located in Oklahoma.

Oklahoma’s amicus brief is available here.