In a span of three days, the CFPB, under Acting Director Mulvaney, significantly retreated in the payday-lending space and suffered a court defeat in its request for monetary relief with respect to a CashCall installment lending program. The federal district court’s decision in CashCall followed a bench trial that occurred before Mr. Mulvaney’s first day at the Bureau, making it unlikely that the CFPB will appeal.
First, on January 17, 2018, the CFPB announced that it intends to reconsider the payday/auto-title/high-rate installment loan rule finalized under former Director Cordray. On the next day, January 18, the CFPB, without explanation, voluntarily dismissed its federal court lawsuit against four online tribal lenders. Finally, on January 19, the federal judge presiding over CashCall in the Central District of California rejected the CFPB’s demand for $235 million in restitution and a penalty of $51 million, and instead awarded a $10.3 million penalty, the amount available for violations that are neither reckless nor knowing.
Most notably, the district court rejected the CFPB’s claims that CashCall intended to defraud and deceive consumers. To the contrary, the court found that:
- CashCall acted in good faith in structuring its tribal lending program and relied on the advice of prominent legal counsel;
- The CFPB failed to produce any evidence to support its allegation that CashCall deceived consumers;
- CashCall “made every effort to inform consumers about all material aspects of the loans;”
- [T]he evidence indicated quite clearly that consumers received the benefit of their bargain;” and
- The CFPB failed to introduce credible evidence of the net amount of unjust enrichment obtained by CashCall.
It is important to note, however, that the district court reiterated and relied on its prior opinion that CashCall, and not the tribal-affiliated entities, was the true lender. CashCall’s appeal of the true-lender decision remains pending.
We will continue to monitor the CFPB’s evolving positions under new leadership, especially its proposal to reconsider, and perhaps radically alter, the current payday/auto-title/high-rate installment loan rule.