Stroock Special Bulletin
"CashCall – A Court Win To Embolden CFPB Enforcement"
The Consumer Financial Protection Bureau (“CFPB”) won a major victory on August 31, 2016, when Judge John F. Walter of the U.S. District Court for the Central District of California granted it partial summary judgment against CashCall, Inc., several related companies and their principal, which allegedly offered high-interest, short-term loans through online tribal lender Western Sky Financial to avoid state usury limits. Although the question of tribal immunity had dominated this case at its beginning, the Judge’s opinion resonates on a broad range of other issues – from identification of the “true lender,” to choice-of-law, to defenses to liability based on reliance, to the CFPB’s authority to find unfair, deceptive and abusive acts or practices (“UDAAPs”) based on violations of state laws. This opinion is likely to have significant impact by emboldening the CFPB’s enforcement activities and increasing uncertainty for companies seeking to reduce regulatory risk.