In 2015, the Consumer Financial Protection Bureau filed a lawsuit against CashCall, Inc., a marketplace lender, alleging that it violated the Consumer Financial Protection Act’s (“CFPA”) prohibition on unfair, deceptive, or abusive acts and practices (“UDAAP”) by making usury loans in violation of the state laws in which the consumers were located.
On June 30, CashCall filed a motion for summary judgment, asking the Court to dismiss the case because, according to CashCall: (1) the state usury rates do not apply because a Native American tribe originated the loans at issue, and the loan documents explicitly state that tribal law (which does not have an interest rate limit) applies; (2) the Bureau does not have authority to enforce state law through the CFPA or any other law even if state law applied; and (3) CashCall did not receive due process because nothing in the CFPA reveals that the Bureau has the authority to enforce alleged violations of state law.
In its five-year existence, the Bureau has initiated many enforcement actions against lenders—and executed consent orders—alleging that a lender violated the CFPA by violating state usury laws. The ruling in this case will have a significant impact on creditors and payment processors, many of whom have been subjected to CFPB enforcement actions alleging UDAAP arising out of state laws, other laws that the Bureau does not enforce, and laws in which the statute of limitations has expired because a ruling against the Bureau will significantly impact its self–expanded interpretation of what constitutes UDAAP.
The Court should rule on the summary judgment motion before the end of August.