The State of Oklahoma has filed an amicus brief in support of the motion to dismiss filed by four online tribal lenders sued by the CFPB for alleged Consumer Financial Protection Act and Truth in Lending Act violations.  The CFPB’s lawsuit was originally filed in an Illinois federal district court and subsequently transferred to federal district court in Kansas.

The CFPB’s complaint alleges that the lenders engaged in unfair, deceptive, and abusive acts or practices in violation of the CFPA by attempting to collect loans that were purportedly void or uncollectible in whole or in part under state law.  The CFPB asserts that the loans are void or uncollectible in whole or in part as a matter of state law because the lenders charged  interest at rates that exceeded state usury limits and/or failed to obtain required state licenses.  The CFPB alleges that the defendants’ efforts to collect amounts that consumers did not owe under state law are “unfair,” “deceptive” and “abusive” under the CFPA as a matter of federal law.  The CFPB also alleges CFPA violations by the defendants based on their alleged failure to disclose the APR as required by TILA in advertisements and when providing information orally in response to telephone inquiries.

This is not the CFPB’s first attempt to transform alleged violations of state law into CFPA UDAAP violations.  However, as we observed when the complaint was filed, the CFPB’s legal position is far more aggressive than it was in its past cases and represents a frontal attack on all forms of tribal lending.  In this case, the CFPB acknowledged that the four lenders are owned by a federally-recognized Indian tribe and thus are tribal entities (and not merely tribal members).  Further, the complaint does not allege that non-tribal parties were the “true lenders” or attempting to collect interest on their own account.

In their motion to dismiss, the lenders argue that as “arms of the tribe,” they are immune from suit under the CFPA and TILA, the CFPB has no authority to enforce state law, and the loans are governed by tribal law. (The CFPB’s complaint alleges that the lenders’ loan agreements contained a tribal choice-of-law provision.)

In its amicus brief, Oklahoma agrees with the lenders’ position that they are immune from suit under the CFPA and TILA.  In addition to questioning the CFPB’s constitutionality, Oklahoma asserts that it “is especially alarmed that the CFPB claims jurisdiction over States and State entities in the same breath as it claims authority over Indian tribes.”  It argues that the CFPB’s position “is without textual support, bad policy, and contrary to our system of federalism and separation of powers.”  According to Oklahoma, if the CFPB’s position is correct, it would mean that “Oklahoma operates a number of agencies that the CFPB may now regulate, investigate, and coerce in the same way the CFPB is investigating Defendants as arms of Indian tribes.”