On January 20, the Ninth Circuit handed the Consumer Financial Protection Bureau (CFPB) a victory in one of the first cases challenging the CFPB’s investigative authority—although that victory seems tied to the particular facts of the case.
The court held that the CFPB has the authority to investigate the activities of for-profit, small-dollar lenders created by three Indian tribes (the “Tribal Lending Entities”). Given the unique facts of the case, however, the decision may provide scant guidance for the other pending cases challenging the CFPB’s authority to issue administrative subpoenas known as Civil Investigative Demands (CIDs).
The case before the Ninth Circuit involved CIDs issued to the Tribal Lending Entities as part of an investigation into whether small-dollar online lenders were violating federal consumer financial laws. Unlike the other pending challenges to the CFPB’s investigative authority, the Tribal Lending Entities did not claim that the nature of their activities (lending money) was outside the scope of the CFPB’s authority. Instead, they argued that the CFPB’s investigative powers – which are limited to sending CIDs to “persons” – did not authorize the agency to send such demands to tribal entities. The Ninth Circuit disagreed.
The court first noted that it was to review de novo “whether the [CFPB] plainly lacked jurisdiction to issue the investigative demands.” The court noted in a footnote that the Tribal Entities had argued that the “plainly lacking” standard was inapplicable. The Tribal Entities had indeed made such an argument in their reply brief, but had failed to articulate an alternative standard they believed applied, other than framing the question as “whether the subpoenaed party is subject to a particular federal law.”
The Court’s substantive analysis began by noting that the Dodd-Frank Act is properly characterized as a law of general applicability and that the Ninth Circuit has “consistently held that similar laws of general applicability govern tribal entities unless Congress has explicitly provided otherwise.” The court then rejected the Tribal Lending Entities’ argument, which rested on Supreme Court precedent holding that the statutory term “person” generally excludes sovereign entities such as states and Native American tribes. Finding the Supreme Court’s ruling to set forth only a presumption, the court looked to the statutory language at issue (the Dodd-Frank Act’s definition of “State” as including Indian tribes) and held that it did not warrant curtailing the CFPB’s investigation. The court similarly rejected the Tribal Entities’ legislative history argument by noting that the “attenuated references” in the legislative history on which the Tribal Entities relied “do not demonstrate that jurisdiction is ‘plainly lacking.’”
While the court’s decision is a victory for the CFPB, it is one limited in scope given the decision’s narrow focus on the particular statutory interpretation question at issue. It remains to be seen whether it has any impact on other pending challenges to the CFPB’s investigative authority. At least three such cases are currently pending, with one scheduled to be argued before the D.C. Circuit next month.