Consumer financial services companies are hopeful that the Supreme Court’s pending decision in Timbs v. Indiana will provide a Constitutional basis for challenging fines and penalties levied by state attorneys general and regulators.  The Supreme Court heard oral argument on November 28 on the issue of whether the Excessive Fines Clause has been (or should be) made applicable to the states through the Fourteenth Amendment.

Petitioner Tyson Timbs pled guilty to dealing a controlled substance and received a six-year sentence of mixed home detention and probation.  In addition, Timbs agreed to pay fines and court costs.  At the time of his conviction, the State of Indiana allowed a maximum fine of $10,000 for the underlying offense.  However, several months after Timbs’ sentencing, the State filed a case seeking civil forfeiture of a vehicle worth approximately $40,000 that Timbs drove at the time of his arrest.  After an evidentiary hearing on the State’s request, the Indiana trial court determined the forfeiture was grossly disproportionate to the underlying crime and therefore unconstitutional under the Eighth Amendment’s Excessive Fines Clause.  On appeal, the Indiana Supreme Court unanimously reversed on the basis that the U.S. Supreme Court has not held that the Excessive Fines Clause applies to the states.

The questions posed by the justices at oral argument suggest a consensus among the bench that the Excessive Fines Clause of the Eighth Amendment is applicable to the states under the Fourteenth Amendment.  However, the questions during oral argument suggest some disagreement on the scope of the rights protected by the Excessive Fines Clause.

Many state attorneys general and state regulators have heightened their supervisory and enforcement activity over consumer financial services companies in the wake of a perceived slackening of enforcement at the federal level, particularly from the Bureau of Consumer Financial Protection.  The industry is hopeful that a Timbs v. Indiana decision applying the Eighth Amendment Excessive Fines Clause against the states could provide significant protection from fines and penalties sought by states.