In a new lawsuit filed in an Illinois federal district court, the CFPB alleges that four online tribal lenders engaged in unfair, deceptive, and abusive acts or practices in violation of the Consumer Financial Protection Act by attempting to collect loans that were purportedly void or uncollectible in whole or in part under state law.
The CFPB’s complaint alleges that the lenders are owned and incorporated by a federally-recognized Indian tribe located in California. According to the complaint, the defendants’ loan agreements contained a governing law provision stating that the loans were made and accepted on tribal lands and governed by tribal law regardless of where the borrower resided at the time the loan was requested. However, the CFPB claims that: the defendants have no storefront on tribal land to originate loans in person; very few, if any, consumers who signed loan agreements did so on tribal lands; and the majority of the people who work on the defendants’ behalf work in Kansas.
The CFPB asserts that the loans are void or uncollectible in whole or in part as a matter of state law because the lenders charged interest at rates that exceeded state usury limits and/or failed to obtain required state licenses. The CFPB alleges that the defendants’ efforts to collect amounts that consumers did not owe under state law are “unfair,” “deceptive” and “abusive” under the CFPA as a matter of federal law. The CFPB also alleges CFPA violations by the defendants based on their alleged failure to disclose the APR as required by TILA in advertisements and when providing information orally in response to telephone inquiries.
This is not the first time the CFPB has attempted to “piggy-back” alleged violations of state law into CFPA “UDAAP” violations. However, in the new case, the CFPB acknowledges that the lenders were tribal entities (and not merely a tribal member). Further the complaint does not allege that non-tribal parties were the “true lenders” or attempting to collect interest on their own account. Thus, the CFPB’s legal position in the new case is far more aggressive than it was in its past cases. Indeed, the new case represents a frontal attack on all forms of tribal lending.