CHICAGO — An expert on consumer financing law says a recent action filed by the Consumer Financial Protection Bureau in Chicago federal court could have far-reaching effects on tribal lending, and more generally, restrict the availability of some forms of consumer credit.
The CFPB was created in 2011 “to provide a single point of accountability for enforcing federal consumer financial laws and protecting consumers in the financial marketplace,” according to its website.
Jeremy Rosenblum, a partner at the law firm of Ballard Spahr in Philadelphia and head of its Consumer Financial Services Group, has 30 years of experience and has represented the American Bankers Association, the Consumer Bankers Association, the U.S. Chamber of Commerce, the Mortgage Bankers Association, the Financial Services Roundtable and the American Financial Services Association.
He said he is unaware of a precedent concerning the CFB’s suit against four tribal lenders.
“Tribal lending is lending by a recognized (American) Indian tribe or a so-called ‘arm of the tribe,’” Rosenblum told the Cook County Record. “This may be the first time (an agency) has gone after the tribal lender itself rather than a non-tribe company involved with the tribe's lending program.”
He said the CFPB suit is different than past attempts to regulate consumer lending because it is trying to collect loans that are allegedly void or uncollectible under state law.
In the suit, the agency contends that for the four lenders in question, the loans themselves did not actually originate on tribal lands because they have no storefronts, and that the lenders charged rates higher than those allowed under state usury laws.
“Effectively, the CFPB is indirectly enforcing state law rather than letting the states enforce their own laws,” Rosenblum said. “This is a frontal attack on tribal lending rather than an attack based on supposed defects in specific programs.”
He said he’s not sure of the long-term impact on the consumer credit industry should the CFPB prevail, but said the unprecedented nature of its tactics could have broader effects than just on tribal lending.
“In general, the more aggressive the CFPB gets, the more credit availability is restricted,” he said.