RSSIn February, the Consumer Financial Protection Bureau filed a notice of voluntary dismissal in a lawsuit it had filed against Golden Valley Lending and three other payday lenders last year. Under former director Richard Cordray, the bureau had originally sought a permanent injunction on the business activities of the four companies, all of which are incorporated on a tribal reservation in northern California but doing business in Missouri.
The original lawsuit was the first CFPB enforcement action against a corporation on a reservation. The bureau accused the companies of collecting on loans that violated state usury and lender licensing laws. The CFPB suit claimed that the lenders were charging interest rates of 440 percent to 950 percent. The bureau also said the companies didn’t disclose loan terms such as annual percentage rates until after a borrower was approved for a loan.
The defendants denied any wrongdoing, claiming that they had operated legally, and claiming that they were working with the CFPB in good faith when they were surprised by the lawsuit. At the time of the suit, the defendants asked the court to dismiss the charges, arguing that state usury laws were not applicable to businesses on the reservation, and that the CFPB had no jurisdiction over them.
“For the reasons outlined in our motion to dismiss, this case should never have been brought in the first place,” said an attorney representing the Native American tribe where the lending businesses were established. “We’re glad that the bureau has withdrawn the lawsuit that was diverting the tribe’s resources and attention away from economic activity that benefits its members and its neighbors.”
The CFPB, now under the leadership of Acting Director Mick Mulvaney, gave no reason for dropping the suit. According to the bureau’s motion, the suit is dropped without prejudice, meaning that the agency could take up the matter again at any time.
“The bureau will continue to investigate the transactions that were at issue,” the CFPB said in a statement. “Because it is an open enforcement matter, we cannot provide further comment.”
The bureau’s statement did not address any change in the regulation of payday lenders, but Mulvaney has publicly criticized the CFPB requirement that payday lenders be required to determine if borrowers could afford to repay their loans. The statement also comes on the heels of a December report that Mulvaney accepted donations from the payday lending industry while campaigning for the House in 2015. Mulvaney denied any connection between those donations and a softer line on payday lending.
