CFPB Responds to Tribal Lenders’ Petition to Supreme Court
The Consumer Financial Protection Bureau (CFPB) filed its response on November 6th to a petition by two tribal lending entities (TLEs) to have the U.S. Supreme Court hear a case on the power of the federal consumer watchdog to issue civil investigative demands (CIDs) against sovereign economic arms of tribal governments. In its opposition brief, the CFPB recounted the reasoning included in a Ninth Circuit Court opinion ordering the TLEs to comply with the CIDs. The question ultimately before the Supreme Court is: “Whether a generally applicable federal statute, which is silent as to its applicability to Indian Tribes, should nevertheless be presumed to apply to Tribes.”
Originally, the CFPB issued CIDs for three TLEs formed by the Chippewa Cree, Tunica-Biloxi, and Otoe Missouria Tribes to determine potential violations under multiple federal laws for advertising, marketing, provision, and collection of small-dollar loan products.
The tribes directed their TLEs not to comply with the CIDs. The tribes’ position was, and continues to be, that the CFPB had no jurisdiction to issue the CIDs because the Consumer Financial Protection Act (CFPA) defined “State” to specifically includes Native American tribes. The tribes argued that since States are explicitly exempt from enforcement of the CFPA that the act also does not apply to tribes. Despite the tribes’ stated position, they offered to cooperate with the CFPB as “co-regulators” of the TLEs. The CFPB declined that offer.
Following rejection of the tribes’ petition in the CFPB’s agency appeal process, the CFPB brought suit in federal district court to enforce the CIDs. The district court ruled in the CFPB’s favor, finding that that the CFPA was a law of general applicability and tribes and their TLEs were subject to the CFPB’s investigative demands. The tribes appealed that decision to the Ninth Circuit Court of Appeals, which affirmed the decision of the trial court. Two TLEs, Great Plains Lending and Plain Green, chose to petition the Supreme Court to review the decision of the 9th Circuit.
The CFPB’s argument asking the Supreme Court to deny the TLEs’ petition closely mirrors the opinion issued in the Bureau’s favor by the 9th Circuit. The CFPB’s response begins with an explanation of its authority to issue CIDs through the CFPA, part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The agency’s position focuses strongly on the definition of “person” under the CFPA. Regardless of the TLEs’ status as “arms of the tribe” (something noted by the CFPB as having not yet been established by the district court), the TLEs are companies and should fall under the definition of “person.” The CFPB believes it ultimately has jurisdiction to issue CIDs to “persons.”
As evidence supporting its position, the CFPB lists a number of industries that are expressly exempted from the CFPA, including real estate brokers and tax accountants. The agency ignored whether the inclusion of tribes in the definition of “State” under the Act qualified as a exemption by Congress. The Bureau went further by showing that government-owned entities were required to comply with other consumer protection statutes like the Truth in Lending Act.
The CFPB notes that the Supreme Court previously found commercial regulations covered “persons” that were privately- and publicly-owned business. The agency also mentioned that deference to sovereignty is at its weakest in off-reservation business transactions.
The CFPB urged the Supreme Court to reject the TLEs’ argument that there is a split in the federal circuits regarding the application to tribes of a federal law of general applicability, arguing that the conflicting appellate court case law would not alter the outcome in this situation.
It will now be up to the justices of the Supreme Court to decide whether or not to hear the case. Four of the nine justices must agree to hear the case. If the Supreme Court denies the petition, the decision by the 9th Circuit will stand.