CFPB wins tender for restitution in CashCall case

Pedestrians walk past the United States Court of Appeals James R. Browning building, home of the 9th United States Circuit Court of Appeals, in San Francisco, California February 7, 2017. Tuesday after midday, the court plans to hear arguments regarding President Donald Trump’s temporary travel ban. on people from seven Muslim-majority countries. REUTERS/Noah Berger

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  • Appeals court says lender’s tribal arrangement violates law
  • The consumer credit agency can renew the offer to recover the losses of the borrowers

(Reuters) – The Consumer Financial Protection Bureau may renew its $200 million restitution bid from CashCall Inc over the lender’s practices, the 9th U.S. Circuit Court of Appeals ruled on Monday.

Circuit Court Judge Eric Miller wrote for the court that a judge erred in rejecting the CFPB’s attempt to get lender CashCall to pay restitution for collecting loans that flouted limits government interest rate.

The appeals court asked U.S. District Judge John Walter to reconsider whether the company should give up its net income from the loans. He has not decided whether restitution is appropriate or what the amount should be.

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A CashCall attorney did not immediately respond to a request for comment on Monday.

The CFPB sued CashCall in December 2013 over the lender’s arrangement with a Native American-owned finance company, which CashCall said allowed it to claim sovereign immunity from state usury laws.

CashCall ended that arrangement after state attorneys general began prosecuting lenders who claimed sovereign immunity but were not members of the lender tribe. CashCall ultimately paid tens of millions of dollars to settle with multiple states.

Miller, joined by U.S. Circuit Court Judges John Owens and Ryan Nelson, wrote Monday that Walter correctly concluded CashCall’s loans were subject to state law and not tribal law because the relationship of the lender with the tribe was “entirely contrived”.

However, the judge erred in holding that the CFPB could not seek restitution, the court heard. Contrary to the judge’s decision, the CFPB was not required to demonstrate that CashCall intended to defraud borrowers.

Walter had also pointed to the fact that borrowers received the money they borrowed, but that was irrelevant to the CFPB’s claim, the appeals court said.

The 9th Circuit also decided to increase a $10.3 million fine against CashCall, saying the lender acted recklessly by continuing to collect loans after 2013 despite clear signs of breaking the law.

The resulting fine could exceed $30 million, as reckless violations come with higher penalties.

The case is Consumer Financial Protection Bureau v. CashCall Inc, 9th US Circuit Court of Appeals, Nos. 18-55407 and 18-55479.

For the CFPB: Kristin Bateman

For CashCall: Reuben Cahn from Keller/Anderle

Read more:

Ham or turkey sandwich? — 9th Circuit assesses remedies in CFPB’s CashCall case

CFPB uses new SCOTUS decision in enforcement cases

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Jody Godoy

Thomson Reuters

Jody Godoy reports on banking and securities law. Contact her at jody.godoy@thomsonreuters.com