The CFPB has filed an amicus brief in the U.S. Court of Appeals for the Second Circuit in The Otoe-Missouria Tribe of Indians et al. v. New York Department of Financial Services et al., a case stemming from New York’s concerted crackdown on the online payday lending industry.  The brief, which supports the DFS, has not yet been posted on the CFPB’s website.

The online tribal lenders are appealing from the district court’s ruling that the DFS could take direct and indirect actions against them.  The lenders had sought to enjoin the DFS’s efforts to stop them from lending to New York residents, arguing the crackdown infringed on their constitutional rights as sovereign nations. 

While taking no position on the applicability of New York law to the lenders’ operations, the CFPB argues in its brief that the court should reject the lenders’ argument that the Consumer Financial Protection Act (Title X of Dodd-Frank) demonstrates a federal interest in protecting tribally-affiliated lenders from state regulation that would otherwise apply.  The CFPB contends that rather than demonstrating an interest in “uniform consumer protection regulation” or “preserving consumer access” to short-term credit, the CFPA “generally reaffirms that states may continue to apply their own laws post-CFPA, and demonstrates that Congress did not intend for ‘uniform’ nationwide regulation that would displace all state law.”  The CFPB points to CFPA Section 1041 which provides that the CFPA generally does not displace state law except to the extent it is inconsistent with the CFPA.  According to the CFPB, under the CFPA, “a state generally remains free to regulate or ban products that  it believes to be harmful to consumers, even if those regulations go beyond federal rules. ” 

The CFPB also refutes the lenders’ contention that the CFPA demonstrates a federal interest in preventing states from applying their laws to tribally-affiliated entities because the CFPA defines the term “State” to include not just the fifty states but also “federally recognized Indian tribe[s].”  According to the CFPB, while the CFPA recognizes a role for tribes in regulatory enforcement of consumer protection laws, it does not demonstrate a federal interest in exempting tribes or affiliated entities from otherwise applicable state laws. 

In its brief, the CFPB references its September 26, 2013 order denying the petition filed jointly by three tribal payday lenders asking the CFPB to set aside the civil investigative demands (CIDs) the lenders received from the CFPB.  The CFPB notes that it rejected the lenders’ argument that they were not subject to the CFPB’s CID authority because they are affiliated with Indian tribes.  We understand, however, that the lenders have not yet responded to the CIDs despite being directed by the CFPB’s order to produce all responsive documents, items and information covered by the CIDs within 21 days.  In addition, the CFPB has not yet taken enforcement action against the lenders.