Arguing That Cashcall Was The "True Lender", CFPB Successfully Challenges High Interest Loan Program

On August 31, a federal district court in California ruled in favor of the U.S. Consumer Financial Protection Bureau (CFPB) on the application of "true lender" principles in the context of a tribal lending arrangement. The court found that the defendant, CashCall, Inc., was the de facto lender of so-called "payday loans" originated by a tribal entity called Western Sky Financial. Although the decision's applicability in other contexts remains unclear, it does represent the latest entry in the developing case law on true lender issues, and the case signals increasing scrutiny of consumer lending arrangements by federal regulators.

The CFPB sued CashCall in December 2013, alleging that CashCall had engaged in unfair, deceptive, and abusive acts and practices under Federal law in violation of the Consumer Financial Protection Act of 2010, 12 U.S.C. § 5536(a)(1)(B), by collecting on loans with interest rates above the usury caps in the borrowers' home states. CashCall is