The Consumer Financial Protection Bureau (CFPB) announced that it has filed suit against four online lenders owned by the federally recognized Habematolel Pomo of Upper Lake Indian Tribe based on alleged violations of state licensing and usury laws.

The factual allegations in this lawsuit, filed in the US District Court for the Northern District of Illinois, are unremarkable. The CFPB charges that the online lenders at issue make small-dollar loans at very high interest rates and that the entities’ tribal ownership is both legally irrelevant and factually dubious. The CFPB also alleges relatively modest violations of Regulation Z’s requirement to disclose the annual percentage rate in an oral response to a consumer inquiry about the cost of credit. The CFPB, however, alleges that the defendants engaged in unfair, deceptive, and abusive acts and practices (UDAAP) in violation of federal law through their efforts to collect on loans that were usurious under state law, or for which other state-law violations vitiated or limited the borrowers’ obligation to repay.

As we reported last fall, New York Department of Financial Services Superintendent Maria T. Vullo stated that she was “ardently opposed” to the Office of the Comptroller of the Currency’s (OCC’s) intention to process applications for a new financial technology (fintech) company charter. We now see just how much her counterparts in other states share that view, as the state bank regulators recently came together under the Conference of State Bank Supervisors (CSBS) banner to ask the federal courts to stop the OCC’s fintech charter initiative.

In its complaint in Conference of State Bank Supervisors v. Office of the Comptroller of the Currency  filed on April 26 in the US District Court for the District of Columbia (Complaint), the CSBS has asked the court to declare that the OCC’s creation of the fintech charter is unlawful and that the OCC be enjoined from pursuing this initiative—saying, in substance, that the OCC doesn’t have the statutory authority to grant nontraditional bank charters of this nature.

After signaling earlier this year that it was considering delaying the effective date of the Prepaid Accounts under the Electronic Funds Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z) final rule (Prepaid Accounts Rule), the Consumer Financial Protection Bureau (CFPB) has officially delayed the effective date of the Prepaid Accounts Rule for six months to April 1, 2018. This delay comes as the CFPB has been facing significant pressure from industry, the US Congress, and consumer groups to delay or (in the case of consumer groups) retain the original effective date of the rule.

Notwithstanding objections from both parties of the US Congress and state banking regulators, the Office of the Comptroller of the Currency (OCC) is moving forward with its proposal to accept applications from financial technology companies for a special purpose national bank charter (FinTech Charter) and has issued draft guidelines (FinTech Charter Guide) for its evaluation of FinTech Charter applications.

We have previously discussed the OCC’s FinTech Charter proposal and its somewhat rocky path (read our previous posts on the topic here and here). The OCC is inviting comments on the draft through April 14, 2017, although we do not expect the final version of the guide to deviate significantly from the current draft.

In the closely watched case of Madden v. Midland Funding, LLC, on which we have reported here and here, the US Second Circuit Court of Appeals ruled that federal preemption principles generally applicable to national banks under the National Bank Act did not extend to nonbank assignees of a bank loan where the bank no longer held an interest in the loan, and federal law therefore did not preempt New York state usury limitations. In turn, the Second Circuit declined to rehear the case, and the US Supreme Court declined to grant certiorari to review the case.

In its decision, the Second Circuit remanded the case to the US District Court for the Southern District of New York for the resolution of remaining state law questions, including whether Delaware law (which has no usury limitations) governed the account agreement. On February 27, 2017, the district court issued an opinion addressing these issues in response to the defendants’ motion for summary judgment and the plaintiff’s motion for class certification.

As we previously reported, a three-judge panel of the US Court of Appeals for the DC Circuit held in October 2016 that the Consumer Financial Protection Bureau (CFPB) was unconstitutionally structured in that too much authority is concentrated in its unitary director. In turn, the panel struck language in the Dodd-Frank Wall Street Reform and Consumer Protection Act that would only permit the US president to remove the CFPB director for cause—thereby permitting the president to remove the director without cause as he would any non-career “political” appointee.

The CFPB subsequently petitioned for en banc review; the court has granted that petition for review and ordered further briefing and a hearing before the full DC Circuit on May 24, 2017.

In the meantime, the October panel decision has been vacated, which means that (i) the CFPB will continue operating as it did before the October decision was filed and (ii) the CFPB director will continue, for the time being, to be removable only for “cause.”

The Office of the Comptroller of the Currency’s (OCC’s) recent announcement that it will receive and process applications for financial technology (fintech) charters is attracting negative attention from diverse sectors of the public arena.

On January 9, Senators Sherrod Brown (D-OH and the ranking member of the US Senate Committee on Banking, Housing, and Urban Affairs) and Jeff Merkley (D-OR) wrote to Comptroller of the Currency Thomas Curry questioning whether the OCC has the authority to grant charters to fintech firms. The senators’ letter notes, among other things, that the authority granted by Congress to the OCC to charter special-purpose national banks is very specific and that the OCC’s proposed activity may exceed what is allowed under the National Bank Act.

As the incoming administration of President-elect Donald J. Trump prepares to roll back federal regulations impacting a wide variety of industries, the battleground will not just be in Washington, DC—it may emerge in the states.

During the Obama administration, state attorneys general—mostly Republican—have used their litigation authority to challenge federal regulations and executive orders that were designed to implement what could not be enacted in the US Congress. With the goal of stopping what they describe as federal government overreach, these attorneys general challenged the Affordable Care Act (Obamacare), Environmental Protection Agency (EPA) clean power rules, Obama’s executive order on immigration, and climate change regulations, among many other federal regulatory activities. In fact, just this week, 18 states filed a lawsuit challenging federal environmental regulations, specifically “overreaching new federal rules that broadly expand the definition of ‘critical’ habitat for endangered and threatened species.”

The Consumer Financial Protection Bureau (CFPB) has filed a petition for rehearing en banc asking the full US Court of Appeals for the District of Columbia Circuit to overturn a court panel’s decision in the much-watched PHH Corporation v. CFPB. In this case, the court held that the CFPB’s structure is unconstitutional and that its director is accordingly an Executive Branch appointee who serves at the president’s pleasure and not for a term of years subject to removal only for cause (as written in the authorizing language of Dodd-Frank, PHH Corporation v. CFPB).

As we have previously discussed, the court concluded that Congress unconstitutionally delegated Executive Branch power when it created an independent agency and authorized it to be headed by a unitary director subject to removal only for cause. However, the court found that the constitutional defect is cured, and the CFPB may continue operating by striking the “for cause” provision, thus subjecting the president to remove the director at will. But for this one change, the court held that the CFPB may continue operating as it has done. 

The election of Donald J. Trump as president and continued Republican control of both the US Senate and House of Representatives may provide the new president the opportunity to immediately remake the Consumer Financial Protection Bureau (CFPB) after he takes office in January 2017.

When a panel of the US Court of Appeals for the District of Columbia Circuit held in October that the structure of the CFPB is unconstitutional, we wrote that the flaw was cured by converting the CFPB’s director from a position that may only be terminated “for cause” to one where the director, as with other administration appointees, serves at the president’s pleasure (see PHH Corporation v. CFPB).