District court approves payday settlement

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On November 10, the U.S. District Court for the Southern District of Mississippi Published a final settlement order resolving allegations that a Mississippi-based payday lender violated the CFPA in connection with check cashing services and low-value loans. As previously covered by InfoBytesthe CFPB filed a lawsuit against two Mississippi-based payday loan and check cashing companies for allegedly violating the CFPA’s prohibition on unfair, deceptive, or abusive acts or practices.

In March 2018, a district court refuse the payday lenders’ motion for judgment on the pleadings, rejecting the argument that the Bureau’s structure is unconstitutional and that the agency’s claims violate due process. The United States Court of Appeals for the Fifth Circuit has agreed to hear an interlocutory appeal on the constitutionality issue and, prior to the United States Supreme Court’s decision in Seila Law LLC v CFPBa split panel tenuous that the CFPB’s single-director structure is constitutional, finding no constitutional flaw in allowing the director of the Bureau to be terminated only for cause (covered by InfoBytes here). The order noted that the 5th Circuit voted spontaneously to rehear the case en banc and issued an opinion in which the majority overturned the opinion of the district court as contrary to Seila Law. However, the majority did not order the district court to enter judgment against the Bureau because, although the Supreme Court found the director’s removal for cause provision to be unconstitutional, it was severable from the statute creation of the Office (covered by a Buckley law Special alert). The majority determined that “the time has come for the district court to proceed” and said it “places[s] no limitations on the matters this court may consider, including, without limitation, any other constitutional challenges.

According to the settlement, the owner and president of the company must pay the Bureau a pecuniary civil penalty of $899,350 “due to the [UDAAP violations] alleged in the complaint. However, the order further stated that the amount was remitted of $889,350 because he had paid “that amount in fines to the Mississippi Department of Banking and Finance.” The district court also Between a separate order dismissing the suit with prejudice.

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