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Consumer Financial Protection Bureau v. Think Finance, LLC

United States District Court, D. Montana, Great Falls Division

August 3, 2018

THINK FINANCE, LLC, formerly known as Think Finance, Inc., et al., Defendants.


          Brian Morris United States District Court Judge


         Plaintiff Consumer Financial Protection Bureau (“CFPB”) commenced this action on November 15, 2017. (Doc. 1.) CFPB filed an Amended Complaint on March 28, 2018. (Doc. 38.) The Amended Complaint alleges four violations of the Consumer Financial Protection Act. (Doc. 38 at 37-42.) Defendants Think Finance, LLC (“Think Finance”), Think Finance SPV, LLC, Financial U, LLC, TC Loan Service, LLC, Tailwind Marketing, LLC, TC Administrative Services, LLC, and TC Decision Sciences, LLC (collectively “Subsidiaries”) filed the instant Motion to Dismiss on April 24, 2018. (Doc. 50.) The Native American Financial Services Association and the State of Oklahoma filed a joint amicus brief in support of the Motion to Dismiss on June 19, 2018. (Doc. 65.) The Court held a hearing on the motion on June 21, 2018. (Doc. 66.)


         Think Finance operates a lending business that extends credit, services loans, and collects debt throughout the United States. (Doc. 38 at 4.) Think Finance SPV, Financial U, and TC Loan Service constitute wholly-owned subsidiaries of Think Finance. (Doc. 38 at 5-6.) Tailwind Marketing, TC Administrative Services, and TC Decision Sciences represent wholly-owned subsidiaries of TC Loan Service. (Doc. 38 at 6-8.) CFPB operates as an independent agency of the United States Government created under the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. § 5491(a). (Doc. 38 at 3.)

         CFPB's Amended Complaint concerns three lending businesses owned by Indian tribes (“Tribal Lenders”) for which Think Finance provided critical services. (Doc. 38 at 4, 9.) The Tribal Lenders are not party to this action.

         The Amended Complaint alleges that Think Finance, through the Tribal Lenders, collected loan payments that customers did not owe, as the loans issued to those customers were void ab initio due to violations of state law. (Doc. 38 at 29, 34, 37-39.) CFPB alleges that Think Finance used unfair and abusive practices to collect on these void loans. (Doc. 38 at 39-41.) Finally, CFPB alleges that Think Finance provided substantial assistance to Tribal Lenders and other entities who, in turn, committed deceptive, unfair, and abuse acts or practices by demanding payment for and collecting void debts. (Doc. 38 at 41-42.)


         Defendants raise multiple grounds for dismissal, including: 1) that the structure of the CFPB is unconstitutional; 2) that the CFPB's claims are not permitted by the CFPA; 3) that the Complaint fails to, and cannot, join indispensable parties; 4) that the Court lacks personal jurisdiction over Think SPV; 5) that the Complaint fails to state cognizable claims under the CFPA; and 6) that certain claims against the Subsidiaries are time-barred. (Doc. 51 at 2.)

         I. The Structure of the CFPB

         Defendants argue that the structure of the CFPB violates the Constitution because the President may remove the Director of the CFPB only for cause. (Doc. 51 at 16.) Defendants argue additionally that the CFPB's ability to control its own budget—subject to a statutory cap—unconstitutionally interferes with Congress's power to direct federal spending pursuant to the Appropriations Clause, U.S. Const. art. I, § 8, cl 1. Defendants point out that the Acting Director of the CFPB and the Department of Justice now question the constitutionality of the CFPB's structure. (Doc. 51 at 17 n.7)

         Nine district court orders have determined that Congress did not violate the constitution in structuring the CFPB. CFPB v. All American Check Cashing, Inc., No. 16-356 (S.D.Miss. Mar. 21, 2018) (ECF No. 236); CFPB v. Future Income Payments, LLC, 252 F.Supp.3d 961 (C.D. Cal. 2017); CFPB v. Nationwide Biweekly Admin., Inc., No. 15-2106, 2017 WL 3948396 (N.D. Cal. Sept. 8, 2017); CFPB v. TCF Nat'l Bank, No. 17-0166 (D. Minn. Sept. 8, 2017) (ECF No. 89); CFPB v. Seila Law, LLC, No. 17-01081, 2017 WL 6536586 (C.D. Cal. Aug. 25, 2017); CFPB v. Navient Corp., No 17-101, 2017 WL 3380530 (M.D. Penn. Aug. 4, 2017); CFPB v. Cashcall, Inc., CV15-7522, 2016 WL 4820635 (C.D. Cal. Aug. 31, 2016); CFPB v. ITT Educ. Servs., 219 F.Supp.3d 878 (S.D. Ind. 2015); CFPB v. Morgan Drexen, Inc., 60 F.Supp.3d 1082 (C.D. Cal. 2014). Only one circuit Court that has considered the issue has determined the CFPB to be unconstitutionally structured.[1] PHH Corp. v. CFPB, 839 F.3d 1 (D.C. Cir. 2016). The D.C. Circuit subsequently reversed that decision upon en banc consideration. PHH Corp. v. CFPB, 881 F.3d 75 (D.C. Cir. 2018) (en banc).

         The D.C. Circuit determined ultimately that the for-cause removal requirement does not “impair[] the President's ability to assure the faithful execution of the law.” Id. at 90 (citing Morrison v. Olson, 487 U.S. 654, 691-92 (1988), and Free Enterprise Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 495-96 (2010)). Similarly, Humphrey's Executor v. United States, 295 U.S. 602, 619-20 (1935), upheld an identical for-cause removal provision for the Federal Trade Commission. Aspects of this argument currently remain pending before the Ninth Circuit. (Doc. 51 at 18 n.8.)

         Elections certainly have consequences, and the CFPB's director and the Department of Justice's shifting position on this issue seem to reflect those consequences. The Defendants present no argument, however, that has not already been rejected by several district courts within the Ninth Circuit, and by the en banc panel of the D.C. Circuit. The Court deems it appropriate to follow these precedents to determine that the structure of the CFPB comports with the Constitution.

         II. The Nature of the Claims and the CFPA

         Defendants argue that CFPB's claims are not permitted by the CFPA. Defendants first argue that the CFPA does not allow the CFPB to bring claims regarding unfair, deceptive, and abusive practices (“UDAAP”) based on state law, or to declare violations of “Federal law” without prior rulemaking. Second, Defendants argue that Congress has explicitly prohibited the CFPB from imposing interest rate limits.

         A. State Law and Usury Limits

         The Amended Complaint alleges that Defendants engaged in deceptive (Count I), unfair (Count II), and abusive (Count III) practices when collecting on loans made by the Tribal Lenders. (Doc. 38 at 37-44.) CFPB alleges that the law of the states in which the Tribal Lenders' consumers resided operated to void the loans due to local usury limits or licensing rules. Defendants' subsequent collection on those void loans constituted the UDAAPs that comprise the subject of the complaint.

         Defendants contend that the CFPB exceeds its statutory authorization to prevent “unfair, deceptive, or abusive act[s] or practices under Federal law” and upsets the balance of state-federal relations by enforcing state law through the CFPA. (Doc. 51 at 21.) Defendants further contend that the CFPB attempts to subvert Congress's explicit prohibition on the CFPB establishing a usury limit. (Doc. 51 at 25); 12 U.S.C. § 5517(o).

         Two district courts have considered similar arguments that the CFPB seeks to enforce a usury limit by prohibiting the collection of void loans. Both courts have determined that “enforc[ing] a prohibition on collecting amounts that consumers do not owe” differs from “establish[ing] a usury limit.” CFPB v. CashCall, Inc., No. 15-7522, 2015 WL 9591569, at *2 (C.D. Cal. Dec. 30, 2015); see also CFPB v. NDG Fin. Corp., No. 15-5211, 2016 WL 7188792, at *18 (S.D.N.Y. Dec. 2, 2016). The Court agrees.

         The argument that CFPB seeks to enforce state law fails for similar reasons. The CFPA declares it unlawful for “any covered person or service provider . . . to engage in any unfair, deceptive, or abusive act or practice.” 12 U.S.C. § 5536(a)(1)(B). The fact that state law may underlie the violation—for example, to operate to void a loan, as alleged here—does not relieve Defendants, or any other covered person or service provider, of their obligation to comply with the CFPA.

         B. Rulemaking and Declaring

         The CFPA authorizes the CFPB to take action to prevent a covered person or service provider from committing or engaging in UDAAPs. 12 U.S.C. § 5531(a). The CFPA further authorizes the CFPB to “prescribe rules” that “identify[] as unlawful” UDAAPs. 12 U.S.C. § 5531(b). The CFPA finally limits the types of conduct that the CFPB may declare unfair or abusive. 12 U.S.C. § 5531(c), (d). Defendants argue that “this structure necessarily ...

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