Bench Memos

The CFPB’s Staggering Claim

I’ve previously written about CEI’s constitutional challenge to the Consumer Financial Protection Bureau, which is currently on appeal to the D.C. Circuit Court of Appeals. According to the lawsuit, the CFPB’s lack of accountability to Congress, the courts, and the president violates separation of powers.  

Unfortunately, as one recent case shows, the CFPB is doing all it can to demonstrate how important it is to place meaningful oversight over the Bureau. The case involves the CFPB’s issuance of a Civil Investigation Demand (CID) to Native American tribal lenders, even though the federal government usually lacks jurisdiction over their lending practices. American Banker has more:

The Consumer Financial Protection Act “broadly authorizes the bureau to issue a CID to ‘any person’ the bureau has reason to believe may have information relevant to a violation,” said Cordray in the denial to the appeal. “And the CFPA’s provision governing the issuance of CID’s has an even broader scope, authorizing the Bureau to issue a CID to ‘any person,’ whether or not a provider of financial products and services.”

Five days after the CFPB issued its orders, the online lenders jointly filed an appeal claiming they were formed and owned by Indian tribes chartered under federal laws that protect them from investigations like the CFPB’s. They also claimed that the CFPB did not provide enough time to respond to the investigation, which asked for information that was “vague, overly broad, and unduly burdensome,” the denial states.

But Cordray argued that the CFPB has full legal authority to proceed and it believes these lenders are going off reservation to lend to non-tribal borrowers.

Even if the CFPB’s legal position is technically correct, the breadth of the CFPB’s claim – they have the ability to “issue a CID to ‘any person the bureau has reason to believe may have information relevant to a violation” [emphasis mine] – is staggering, and all the more reason to reign in the CFPB. How else will consumers find protection from the abuse of their far-reaching claims to power?

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