The CFPB announced that it has entered into a proposed consent order with Think Finance and six subsidiaries (collectively, the “Think Entities’) to settle the Bureau’s lawsuit filed in November 2017 that alleged the Think Entities engaged in unfair, deceptive, and abusive acts or practices in connection with their collection of loans that were void under state law because the loans’ interest rates exceeded state law limits or the lenders who made the loans had not obtained required state licenses. The loans in question were made by companies owned by Native American tribes. The relevant states are Arizona, Arkansas, Colorado, Connecticut, Illinois, Indiana, Kentucky, Massachusetts, Minnesota, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, and South Dakota (“Subject States”).
After the lawsuit was filed, the Think Entities filed for Chapter 11 bankruptcy relief. The consent order prohibits the Think Entities and the reorganized Think Entities (“Enjoined Parties”) from providing services to a lender that constitute “extending credit to, servicing credit extended to, or collecting on credit extended to” a consumer who resides in a Subject State where the loan made by the lender would violate the Subject State’s usury law or the lender is not properly licensed in the Subject State. It also prohibits the Enjoined Parties from providing services directly to a lender, or to a third party for the lender’s use, in connection with the lender’s activities “in extending credit to, servicing credit extended to, or collecting on credit extended to” a consumer who resides in a Subject State where the loan made by the lender would violate the Subject State’s usury law or the lender is not properly licensed in the Subject State and the Enjoined Party knows, or is reckless in not knowing, that the lender is making such a loan. These prohibitions do not apply to loans “originated or issued” by federally- or state-chartered depository institutions or another entity if federal law preempts the application of state law to the loan.
The consent order’s monetary provisions, which are part of the Think Entities’ bankruptcy plan, requires each of the Think Entities to pay a $1 civil money penalty (or a total of $7). The Bureau’s press release states that the proposed consent order is part of “the global resolution of the Think Finance Entities’ bankruptcy proceeding…which includes settlements with the Pennsylvania Attorney General’s Office and private litigants in a nationwide consumer class action. Consumer redress will be disbursed from a fund created as part of the global resolution, which is anticipated to have over $39 million for distribution to consumers and may increase over time as a result of ongoing, related litigation and settlements.”
Since the Bureau’s lawsuit against the Think Entities was filed under former Director Cordray’s leadership, the settlement does not provide insight regarding Director Kraninger’s views on tribal lending or the Bureau’s enforcement of state usury laws.