On January 19, a federal district court judge closed the damages phase of the CFPB’s long-running challenge to CashCall’s tribal-lending operation by ordering the company and its associates to pay a $10 million penalty. While the $10 million penalty is substantial, the order stands as an impressive victory for CashCall, as the CFPB requested a $52 million penalty and an additional $236 million in restitution.

In the earlier liability phase of the litigation, U.S. District Court Judge John F. Walter granted the CFPB’s motion for partial summary judgment, finding that CashCall engaged in unfair, deceptive, and abusive acts or practices when it serviced and collected on loans made by Western Sky Financial, a lending operation owned by an enrolled member of the Cheyenne River Sioux Tribe. Invoking a contested doctrine, Judge Walter found that CashCall was the “true lender” of the loans and, therefore, had deceived consumers by creating the false impression that the loans were enforceable and that borrowers were required to repay them.

But in the damages phase of the litigation, Judge Walter softened his earlier ruling. He rejected the CFPB’s request for $236 million in restitution, finding that the CFPB failed to present any evidence that CashCall “set out to deliberately mislead consumers” or “otherwise intended to defraud them.” In the same vein, he rejected the CFPB’s reliance on evidence that CashCall structured its lending operation to avoid state licensing and usury laws, noting that “companies frequently structure business operations and transactions to minimize exposure to unfavorable laws and regulations.” He also found that CashCall “plainly and clearly disclosed the material terms of the loans to consumers,” and that “the evidence indicated quite clearly that consumers received the benefit of their bargain—i.e., the loan proceeds.”

In addition, Judge Walter rejected the CFPB’s request for a $52 million penalty. In seeking that award, the CFPB argued that CashCall “knowingly” engaged in unfair, deceptive, and abusive acts or practices. But Judge Walter found that the CFPB failed to prove that CashCall knowingly engaged in any misconduct; in fact, he noted that, “at its inception, there was nothing inherently unlawful about” CashCall’s lending operation.

Moreover, Judge Walter also rejected the idea that CashCall was reckless. “[T]here was no evidence [CashCall] decided to create and implement an unlawful scheme to defraud consumers, which would have been relatively easy to accomplish given their sophistication and experience in the lending business,” Judge Walter wrote. “Instead, [CashCall] sought out highly regarded regulatory counsel to assist them in structuring the Western Sky Loan Program.”