We recently reported that the CFPB has filed a petition in U.S. District Court for the Central District of California seeking to enforce the civil investigative demands (CIDs) it issued in June 2012 to three tribally-affiliated payday lenders.  A hearing on the petition has been scheduled for April 28.

In their joint memorandum of law filed in opposition to the CFPB’s petition, the lenders argue that, as arms of sovereign tribes, they are not subject to the CFPB’s investigative authority.  The Consumer Financial Protection Act (CFPA) authorizes the CFPB to issue CIDs to “any person” and to petition to enforce a CID when “any person” fails to comply.  Citing to decisions of the U.S. Supreme Court and other federal courts, the lenders argue that “sovereigns” are presumptively not “persons” within the meaning of the CFPA.

According to the lenders, the exclusion of “sovereigns” from the term “person” also extends to arms of Indian tribes such as the lenders.  They further argue that because federally recognized Indian tribes are expressly included within the CFPA’s definition of “State,” and Congress intended “States” to be co-regulators with the CFPB rather than regulated entities, the CFPB cannot overcome the presumption that Congress did not intend to include sovereign entities within the definition of “person.”

The lenders make the additional arguments that the CIDs are barred by the lenders’ sovereign immunity, do not provide adequate notice of the purpose and scope of the CFPB’s investigation, and are overbroad.