WASHINGTON The Consumer Financial Protection Bureau on Thursday denied an appeal made by several Native American tribal lenders who were seeking to block a civil investigation into their online payday lending practices.
The CFPB published both the denial and the original appeal made by online lenders, Great Plains Lending, MobiLoans and Plain Green, that offer small-dollar loans to tribes. In denying the appeal, CFPB Director Richard Cordray said tribal protections do not restrict the CFPB from investigating any lender for potential violations of federal laws on areas such as marketing and collection of small-dollar loan products. The CFPB said it would proceed with its investigation and the civil investigation demand orders issued against each lender on June 12.
The Consumer Financial Protection Act "broadly authorizes the bureau to issue a CID to 'any person' the bureau has reason to believe may have information relevant to a violation," said Cordray in the denial to the appeal. "And the CFPA's provision governing the issuance of CID's has an even broader scope, authorizing the Bureau to issue a CID to 'any person,' whether or not a provider of financial products and services."
Five days after the CFPB issued its orders, the online lenders jointly filed an appeal claiming they were formed and owned by Indian tribes chartered under federal laws that protect them from investigations like the CFPB's. They also claimed that the CFPB did not provide enough time to respond to the investigation, which asked for information that was "vague, overly broad, and unduly burdensome," the denial states.
But Cordray argued that the CFPB has full legal authority to proceed and it believes these lenders are going off reservation to lend to non-tribal borrowers.
"In particular, the bureau has reason to believe that the lenders are making loans to non-Indians over the internet, and it seeks to investigate those lending practices for compliance with Federal consumer financial law," Cordray said.
Recent reports indicate that some tribal lenders charge interest rates well above state usury laws because of their legal protections. But critics have also raised concerns that non-tribal, small-dollar lenders like ThinkFinance and ZestFinance are partnering with tribal lenders on certain products to get around state laws.
Speaking about the three tribal lenders in the appeal who argued they needed more time and the agency's broad requests were too burdensome, Cordray said that is "baseless and must be rejected."
"The CIDs provide adequate notice of the purpose and scope of the Bureau's investigation," Cordray said. The governing statute "does not require a detailed narrative, and it is 'well settled that the boundaries of an [agency] investigation may be drawn quite generally'."
However, Cordray said the cited lenders "are welcome to continue" discussing issues about the scope and burden of interrogations or document requests by the agency's enforcement team.
The agency concluded that it will proceed with the investigation and the lenders must provide the requested information within 21 days from Thursday's decision.