Banking and Finance Law Daily Wrap Up, CONSUMER FINANCIAL PROTECTION BUREAU—CFPB denies petitions to set aside CIDs, keep petition confidential, (Sep 30, 2013)

By Katalina M. Bianco, J.D.

The Consumer Financial Protection Bureau has denied a joint petition to set aside civil investigative demands (CIDs) the bureau issued to Great Plains Lending, LLC, MobiLoans, LLC, and Plain Green, LLC. The lenders were directed to comply with the CIDs within 21 days of the decision. The bureau also denied a request for confidential treatment of the joint petition.

The CFPB denied the joint petition because the petition presents issues of federal authority over lenders whose businesses are related to Indian tribes. The bureau has decided that these issues bear precedential value and merit further discussion.

Background. On June 12, 2012, the CFPB issued CIDs for answers to interrogatories and production of documents to the lenders as part of the bureau’s investigation into online lending entities offering small-dollar loan products such as payday loans, installment loans, and lines of credit. The CIDs included a Notification of Purpose, which advised the lenders that the bureau was seeking to determine whether online lenders had engaged in unlawful acts or practices relating to advertising, marketing, provision, or collection of small-dollar products in violation of the Dodd-Frank Act, Gramm-Leach-Bliley Act, Electronic Funds Transfer Act, Truth in Lending Act, or any other federal consumer financial statute.

On July 17, 2012, the lenders filed a joint petition to set aside the CIDs. The lenders explained in the petition that they are limited liability companies organized and chartered under the laws of federally-recognized Indian tribes. Each lender is wholly owned by its tribe, according to the petition.

Petitioners’argument. The CFPB noted that the bureau will not set aside a CID if:

1. the investigation is for a lawfully authorized purpose;

2. the information requested is relevant to the investigation; and

3. procedural requirements are followed.

The petitioners’ primary argument is that the bureau does not have authority to issue CIDs to tribally-affiliated entities. Therefore, they contended, the investigation is not for a lawfully authorized purpose.

Petitioners specifically argued that the Consumer Financial Protection Act does not authorize the bureau to issue CIDs to tribally-affiliated entities. Further, even if the CFPA authorizes the CIDs in this case, tribal sovereign immunity takes precedent over that authority.

CFPB response. The bureau responded to the petitioners’ argument by noting that the CFPA authorizes the bureau to issue a CID “to any person” the bureau believes may have information relevant to a violation (12 U.S.C. §5562(c)). The definition of “person” under the act includes “company” and “other entity.” Petitioners admit to being limited liability companies, and the bureau wrote that petitioners “no doubt” could be regarded as “other entities” under the definition.

The CFPB argues that the Supreme Court has established the framework for analyzing whether a federal statute applies to Indian tribes, individual Indians, and tribally-affiliated entities. The Court concluded in 1960 that “it is now well settled by many decisions of this Court that a general statute in terms of applying to all persons includes Indians and their property interests.” (FPC v. Tuscarora Indian Nation, 362 U.S. 99, 116).

The CFPA is subject to the Tuscarora presumption, the bureau stated, because it is a statute of general applicability. While there are certain established exemptions to the general presumption, the current case does not fall within those exemptions.

Tribal immunity. The petitioners claimed that tribal sovereign immunity protects them from CIDs issued by the CFPB. The bureau responded that “every court of appeals to address the issue has agreed that Indian tribes, like individual States, do not enjoy immunity from suits by the federal government.” The bureau said that petitioners did not offer any plausible grounds to overcome this “settled” point.

Confidentiality request. When the lenders submitted their joint petition to set aside the CIDs in July 2012, they also included a request for confidential treatment of the petition pursuant to 12 CFR 1080.6(g) and 1018.14. Petitioners stated that they were seeking “confidential treatment of their identities because public disclosure of the existence of the investigation would harm their business interests.” Petitioners argued that because investigations “are generally non-public,” petitions to set aside or modify a CID should also be non-public.

In February 2013, petitioners filed a supplemental written request for confidentiality of the petition. When the CFPB granted their request for the subsequent writing, the bureau asked them to explain whether good cause exists for confidential treatment.

When denying the request for confidential treatment, the bureau said that when making a decision on confidentiality of a CID, the CFPB generally employs the standards for withholding material from public disclosure established by the Freedom of Information Act (FOIA) amendments to the Administrative Procedure Act. Petitioners failed to meet those standards, the bureau said.

Companies: Great Plains Lending, LLC; MobiLoans, LLC; Plain Green, LLC

LitigationEnforcement: CFPB CrimesOffenses DoddFrankAct Loans Privacy TruthInLending