Last Friday, the CFPB replied to the arguments made by three tribally-affiliated payday lenders in opposition to the CFPB’s petition in California federal court seeking to enforce the civil investigative demands (CIDs) issued by the CFPB to the lenders. A hearing on the petition was scheduled for yesterday.
The lenders argued that, as arms of sovereign tribes, they are not subject to the CFPB’s investigative authority. According to the lenders, they are “sovereigns” and therefore presumptively are not “persons” to whom the CFPB can issue CIDs under the Consumer Financial Protection Act (CFPA). The lenders contended that they are instead within the CFPA’s definition of “State,” and because 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.”
In its reply, the CFPB argued that, even if they are arms of tribes and within the definition of “State,” the lenders are still “companies” that fall within the definition of “persons” subject to CIDs under the CFPA. According to the CFPB, the interpretative presumption found in case law that the term “person” does not include a “sovereign” has never been applied by the U.S. Supreme Court or the Ninth Circuit to determine whether a federal agency can apply a federal law of general applicability to a tribal business, even a law that applies to “persons.” Instead, the CFPB argued that in making such a determination, the Ninth Circuit and other courts have applied a framework under which a law of general applicability will be presumed to apply to tribal entities unless one of three exceptions are met. Those exceptions, as listed by the CFPB, are:
(1) applying the law would interfere with a tribe’s right of self-governance on internal matters,
(2) applying the law would abrogate treaty rights, or (3) there is proof that Congress intended to exempt tribes.
According to the CFPB, the lenders are subject to its authority under the CFPA to issue CIDs because it is a statute of general applicability (and is silent on its applicability to Indian tribes) and none of the three exceptions apply. In response to the lenders’ additional argument that the CIDs are barred by tribal sovereign immunity, the CFPB argued that tribes do not have sovereign immunity from suits by the federal government.