The multistate case affirms the authority of state attorneys general to file consumer financial protection law claims together. It rejects the argument that if the Supreme Court finds the CFPB has unconstitutional funding, the law is unenforceable by anyone.
01/23/2024 1:10 P.M.
3 minute read
A case from multiple state attorneys general against a private equity-owned lender will proceed after the U.S. District Court for the Eastern District of Pennsylvania denied the defendant’s motion to dismiss on finding that states do not have authority to sue under the federal Consumer Financial Protection Act (CFPA).
“The lawsuit alleges that Mariner Finance charged consumers for hidden add-on products that consumers either didn’t know about or didn’t agree to buy,” according to a news release from Pennsylvania Attorney General Michelle Henry.
Mariner Finance filed a motion asking the federal court to dismiss 15 federal and state law claims.
According to a memorandum from the court (PDF), Mariner filed the motion to dismiss the lawsuit because it is “an extreme instance of government overreach of states and localities seeking to enforce the CFPA as if collectively, they are the federal agency [the Bureau] created by the act with sole authority to engage in such nationwide enforcement.”
However, the Consumer Financial Protection Bureau has an interpretive rule that outlines states’ authorities to file cases for violations of federal consumer financial protection laws, including the CFPA.
In the rule, the CFPB provided clarity on the following points, according to a summary from Brownstein Hyatt Farber Schreck LLP:
- States have the authority to enforce the CFPA and the other laws contained within it, as well as any rule or order issued by the CFPB under the statute;
- The limitations imposed by the CFPA on the CFPB’s authority largely do not constrain states’ enforcement authority; and
- States are not restricted from bringing enforcement action independent of or concurrently with the CFPB.
Notably, the interpretive rule signals that states have the authority to independently take action against entities that engage in unfair, deceptive, or abusive act or practices (UDAAP) and fall outside the scope of the CFPB’s authority under the statute. The rule is the latest effort by the CFPB to partner with states and support enforcement efforts, ACA International previously reported.
Mariner also argued “that if the [b]ureau receives unconstitutional funding, that will render the entire CFPA unenforceable by anyone, including the [s]tates, who were granted separate and concurrent enforcement authority by Congress.”
This refers to CFPB v. Community Financial Services Association of America Ltd. (CFSA), which is pending a decision from the U.S. Supreme Court on the funding structure of the CFPB, ACA previously reported.
CFSA filed suit against the CFPB and Director Rohit Chopra challenging the bureau’s 2017 payday lending rule on the grounds the rule is not valid because the CFPB’s funding structure is unconstitutional.
The 5th Circuit Court of Appeals found that the bureau’s funding structure is unconstitutional and violates the appropriations clause. The CFPB petitioned for the Supreme Court to hear the case, which it did in October 2023.
A decision is expected between now and the end of June 2024.
According to the federal court’s ruling, it rejected Mariner’s main argument that the venue was improper because the five plaintiff states chose to sue together in one court rather than in five separate courts, according to the Pennsylvania AG.
It also rejected the argument that the states had failed to comply with the CFPA’s provision that provides for states to notify the CFPB of a planned CFPA lawsuit.
The Pennsylvania news release says this decision is “one of the only cases to date where a court has weighed in on these issues.”
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