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  • CFPB Urges Supreme Court to Reject Tribal Lenders' Petition

    Courts

    On November 9, the CFPB filed a brief with the Supreme Court opposing the petition for a writ of certiorari submitted by online tribal lending entities.  The lenders are challenging a January decision by the Ninth Circuit Court of Appeals, which ordered the entities to comply with a CFPB investigation (previously covered by Infobytes). The litigation stems from the issuance of a civil investigative demand (CID) by the CFPB to online lending entities owned by Native American tribes. The entities argue that due to tribal sovereignty, the CFPB does not have jurisdiction over the small-dollar lending services in question. The district court and the Ninth Circuit concluded that the Consumer Financial Protection Act (CFPA) did not expressly exclude tribes from the CFPB’s enforcement authority and therefore, the entities cannot claim tribal sovereign immunity.

    In its brief opposing the certiorari petition, the CFPB argues that the Ninth Circuit’s holding does not conflict with any prior Supreme Court or court of appeals decision, making further review unwarranted. The CFPB also argues, among other things, that Supreme Court review is unnecessary because “[t]he question at this juncture is solely whether the Bureau may obtain information from petitioners pursuant to a CID,” not “whether petitioners are subject to the Bureau’s regulatory authority.” 

    Courts CFPB Payday Lending Consumer Lending U.S. Supreme Court Appellate Ninth Circuit

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  • Ninth Circuit Claims California Licensing Law Violates Dormant Commerce Clause

    Courts

    On October 10, the U.S. Court of Appeals for the Ninth Circuit handed down an opinion concerning alleged violations of certain California statutes by an Ohio-based mortgage servicer (plaintiff). The panel held that the plaintiff is likely to prevail in its bid for a court order blocking the enforcement of the state’s financial code by certain California district attorneys because the law violates the Dormant Commerce Clause—a legal doctrine that prohibits states from unduly burdening interstate commerce. The defendants allege that the plaintiff violated Section 12200 of the California Financial Code, which requires a prorater—a person who is compensated for receiving monies from debtors and distributing the funds to creditors—to obtain a California prorater license and be incorporated in the state before conducting business on an interstate basis. The panel determined that “[t]his form of discrimination between in-state and out-of-state economic interests is incompatible with a functioning national economy, and the prospect of each corporation being required to create a subsidiary in each state is precisely . . . [what] the Dormant Commerce Clause exists to prevent.” Consequently, the panel vacated the district court’s order denying a preliminary injunction, and remanded for further proceedings.

    The panel also affirmed the district court’s ruling that the plaintiff was required to disclose in its mail solicitations to homeowners that it “lacked authorization from lenders,” and opined that the plaintiff would most likely not prevail in its effort to challenge allegations that it violated sections of the California Business and Professions Code on a First Amendment basis. The First Amendment, the panel reasoned, “does not generally protect corporations from being required to tell prospective customers the truth.”

    Finally, in a portion of the opinion in which one of the circuit judges dissented, the panel reversed a district court’s order dismissing both cases under Younger v. Harris “because the cases had proceeded beyond the ‘embryonic stage’ in the district court before the corresponding state cases were filed.” Judge Montgomery—who otherwise joined the opinion with respect to the Dormant Commerce Clause and First Amendment questions—argued that the district court's dismissal under Younger should have been upheld because “[b]oth cases arrived in federal court…as a preemptive strike by [the plaintiff] to enjoin state district attorneys from enforcing state statutes in state court.”

    Courts Appellate Licensing Ninth Circuit

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  • Ninth Circuit Rules FCRA Plaintiff Has Article III Standing

    Courts

    On August 15, the U.S. Court of Appeals for the Ninth Circuit issued an opinion, on remand from the U.S. Supreme Court, ruling that a consumer plaintiff could proceed with his Fair Credit Reporting Act (FCRA) claims because he had sufficiently alleged a “concrete” injury and therefore had standing to sue under Article III of the Constitution. Robins v. Spokeo, Inc., No. 11-56843, 2017 WL 3480695 (9th Cir. Aug. 15, 2017). By way of background, the plaintiff had alleged that the defendant consumer reporting agency “willfully violated various procedural requirements under FCRA,” and consequently published an inaccurate consumer report on its website that “falsely stated his age, marital status, wealth, education level, and profession” and “included a photo of a different person.” In May 2016, the Supreme Court vacated an earlier Ninth Circuit decision, finding that the court failed to consider an essential element of Article III standing: whether the plaintiff alleged a “concrete” injury. (See previous Special Alert here.) After providing some guidance—including that the plaintiff’s injury must be “real” and not “abstract” or merely “procedural”—the high court remanded to the Ninth Circuit for further consideration. 

    On remand, the court first asked “whether the statutory provisions at issue were established to protect [the plaintiff’s] concrete interests (as opposed to purely procedural rights).” The court answered affirmatively, finding that “the FCRA procedures at issue in this case were crafted to protect consumers’ . . . concrete interest in accurate credit reporting about themselves.” Next, the court asked “whether the specific procedural violations alleged in this case actually harm, or present a material risk of harm to, such interests.” The court again answered affirmatively, finding that the plaintiff sufficiently alleged that he suffered a “real harm” to his “concrete interests in truthful credit reporting.” That is, the plaintiff sufficiently alleged that the defendant “prepared . . . an [inaccurate] report,” “that it then published the report on the Internet,” and that “the nature of the specific alleged reporting inaccuracies” was not “trivial or meaningless,” but instead covered “a broad range of material facts” about the plaintiff’s life “that may be important to employers or others making use of a consumer report.” Finally, the court found that the plaintiff’s allegations were not too speculative, because “both the challenged conduct and the attendant injury have already occurred.” After reaffirming that the plaintiff had adequately alleged the other essential elements of standing, the court remanded to the Central District of California for further proceedings.

    Courts FCRA Appellate Litigation Ninth Circuit U.S. Supreme Court

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  • Nevada Supreme Court Holds that HOA "Superpriority" Statute Does Not Violate Due Process, Declines to Follow 9th Circuit

    Courts

    On January 26, in Saticoy Bay LLC Series 350 Durango 104 v. Wells Fargo Home Mortgage, No 68630, (Nev. Jan 26, 2017), the Nevada Supreme Court reaffirmed its interpretation of the state statute granting priority lien status to unpaid condo assessments (Nev. Rev. Stat. § 116.3116 et seq.); specifically that foreclosure of such liens extinguishes prior-recorded mortgages. The Nevada Supreme Court declined to follow a 2016 ruling by the Ninth Circuit holding that the statute violates the Due Process Clause of the 14th Amendment. Rather, the Nevada Supreme Court stated that the Due Process Clause protects individuals from state actions, and a foreclosing HOA cannot be deemed to be a state actor. In doing so, the court specifically notes that “[w]e acknowledge that the Ninth Circuit has recently held that the Legislature's enactment of NRS 116.3116 et seq. does constitute state action. . . . However, for the aforementioned reasons, we decline to follow its holding.”

    Courts Mortgages Foreclosure Due Process HOA Ninth Circuit

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  • Ninth Circuit Orders Tribal Lenders to Comply with CFPB Investigative Demands

    Courts

    On January 20, the Ninth Circuit issued an opinion affirming the U.S. District Court for the Central District of California’s 2014 order enforcing the investigative demands against three tribal lending entities. The investigative demands are centered on determining whether small-dollar online lenders or other persons have engaged or are engaging in unlawful acts or practices relating to the advertising, marketing, provision, or collection of small-dollar loan products, in violation the Dodd-Frank Act and other Federal consumer financial laws. According to the opinion, the court claims that in “the Consumer Financial Protection Act, a generally applicable law, Congress did not expressly exclude tribes from the Bureau’s enforcement authority” and thereby, the tribes cannot claim tribal sovereign immunity.

    Courts Consumer Finance CFPB Dodd-Frank Ninth Circuit

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