The powerful financial enforcement agency created by Dodd-Frank is bringing its legal guns to bear on Indian tribes — and the Native Americans are now fighting back.
The Consumer Financial Protection Bureau (CFPB) filed a last-minute brief in a federal court last week defending Benjamin Lawsky, New York’s top financial regulator, against a lawsuit from two western Native American tribes.
The Indians sued Lawsky for sending “cease-and-desist” letters last summer to their online payday loan businesses serving New Yorkers, even though the tribes are sovereign entities and aren’t even based in New York. While Lawsky contends that the interest rates on the payday loans are too high, the tribes argue that they follow federal law and that Congress — not individual states — have sole jurisdiction over their actions.
The case could fundamentally alter the relationship between Washington, Indian tribes and the states — and the fact that a federal agency has now sided with Lawsky bodes poorly for the future of tribal sovereignty.
On Tuesday the Indians returned fire, filing a letter requesting that the court reject the CFPB and two other briefs. “The policy arguments raised in the amicus briefs are largely irrelevant to the tribal sovereignty issues on appeal before the Court,” wrote David Bernick, the tribes’ lead attorney.
At issue is the role of the CFPB in setting and promoting consistent financial regulations across the country. The tribes had argued that the federal government has an interest in maintaining a coherent system of regulations, and that New York’s targeting of another sovereign entity undermines that system.
The CFPB’s brief disputed that claim, claiming that their role as a coordinator of financial laws is restrained by Dodd-Frank. But as the Indian counter-brief notes, the text of Dodd-Frank mandates the CFPB “to promote consistent regulatory treatment of consumer financial… services.”
The Indian tribes feel betrayed. Barry Brandon, the head of the Native American Financial Services Association, told The Daily Caller News Foundation that his organization has met at least six times with the CFPB over the past year, engaging in “an honest and robust” dialogue and making progress with federal regulators.
“At the same time as the CFPB’s policy division appeared to be making inroads towards an agreement, the same CFPB’s enforcement division blew up those dialogues with their filing of an amicus brief that is squarely at odds with the needs of Indian country and the prior commitments made by the CFPB,” Brandon lamented.
“Irrespective of any disclaimers, CFPB is very clearly taking a side here and advocating for specific interest rate caps,” said a member of the finance industry in a statement to TheDCNF, who declined to be named due to ongoing legal wrangling. “That is both contrary to the remit for the CFPB established by Dodd-Frank, and — peculiarly as an agency created by a law that reserves federal jurisdiction over these matters — an argument that state law should override [federal law].”
Others took issue with the CFPB’s novel tactics. “The CFPB really ambushed the tribes,” said John Berlau, an economist at the Competitive Enterprise Institute. “They filed that brief right when the tribes were filing their reply brief, and the tribes really don’t have a chance to [officially] respond.”
Berlau also contends that the CFPB should have filed its brief through the Justice Department’s solicitor general. “I’ve never seen a case where a separate federal agency files an amicus brief in which the Justice Department has not signed on to,” he told TheDCNF.
“The CFPB is an agency accountable to no one,” Berlau concluded. “It is acting separate from the rest of the government and this proves it… They have a paternalistic attitude about payday loans, and they’re exceeding all bounds to stamp them into the ground, not realizing that both the tribes and lower-income consumers would be hurt.”
CFPB spokesman Sameul Gilford told TheDCNF the brief “was filed at the ordinary time for filing appellate amicus briefs.” He cited a Thursday court order saying “the motions were timely submitted seven days after the submission of appellees’ brief.”
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