Native American tribal lenders that market small-dollar and installment loans can be investigated by the Consumer Financial Protection Bureau, a California appeals court ruled Friday in a victory for the consumer agency.
A panel of the Ninth Circuit Court of Appeals found that the online lenders Great Plains Lending, MobiLoans and Plain Green, which offer payday and installment loans, must comply with civil investigative demand issued by the CFPB.
The court upheld a lower court ruling that tribal businesses are covered by the Consumer Financial Protection Act and that Congress did not expressly exclude Indian tribes from the CFPB's enforcement authority.
"It is undisputed that the tribal lending entities are engaged in the business activity of small-dollar lending over the Internet, reaching customers who are not members of the tribes, or indeed, have any relation to the tribes other than as debtors," Circuit Judge Johnnie B. Rawlinson wrote in a 20-page opinion in the case, CFPB v. Great Plains Lending.
The companies had argued they should receive sovereign immunity because they were created and operated by the Chippewa Cree, Tunica Biloxi and Otoe Missouria tribes.
The Consumer Financial Protection Act broadly authorizes the CFPB to issue an investigative demand to any "person." The lenders had argued that Indian tribes fall under the act's definition of a "state," but the appeals court rejected that view.
The CFPB first pursued the tribal entities in 2013 but the companies initially refused to respond to its request.