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CFPB Wins Judgment over Lender Using Tribal Model
August 31, 2016
On Wednesday, August 31, 2016, the U.S. District Court for the Central District of California granted partial summary judgment to the CFPB in a 2013 lawsuit against CashCall, Inc., an online loan servicer, turning a violation of state usury law into a federal violation of unfair, deceptive and abusive acts and practices (UDAAP). The Court ruled CashCall engaged in UDAAP by using a "tribal model" to collect on loans in states with usury caps.
CashCall and its subsidiary, WS Funding, acquired and serviced loans made by Western Sky, which claimed immunity from state interest rate caps due to an affiliation with a sovereign Native American tribe, the Cheyenne River Sioux Tribe. The loans ranged from $850 to $10,000 and typically had upfront fees, lengthy repayment terms and annual interest rates ranging from 90 to 343 percent, the CFPB said.
The Court found CashCall, not Western Sky, was the true lender and, despite the tribal affiliation, the laws of the borrowers' home states applied to the loan agreements.