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Consumer Financial Services Alert
Nevada Federal Court Holds Tribal Lender Subject to FTC Jurisdiction

Adopting a magistrate judge’s report and recommendations, the United States District for the District of Nevada held that the FTC has enforcement jurisdiction over tribal payday lenders. The FTC filed a complaint against defendants alleging that they violated the Federal Trade Commission Act, the Truth in Lending Act, and the Electronic Funds Transfer Act in connection with offering of payday lending and the collection of the payday loans. Defendants argued that the FTC lacked authority to bring the action because they were “arms of an Indian tribe, employees of an Indian tribe, or businesses associated with arms of Indian tribes.” The FTC moved for summary judgment. The magistrate judge issued a report recommending that the case proceed on two of the FTC’s four claims. The FTC already prevailed on summary judgment on its other two claims: (1) deceptive acts and practices in online advertisements that did not accurately state the customer’s total amount of payments on the loan and failure to disclose (except in fine print) an automatic “renewal” loan from which the borrower would have to opt out; and (2) the loan disclosure was ambiguous and therefore did not clearly and conspicuously reflect the terms of the credit transaction in violation of TILA.

In adopting the magistrate judge’s report and recommendation, the Court held that it was the lender’s burden, not the FTC’s, to prove that an exception to the agency’s general regulatory and enforcement authority warranted a finding excluding the lender from regulation. The Court also held that the FTC Act is a law of “general applicability” that, because it does not otherwise unduly impinge on tribal rights and because there was no legislative intent to exclude tribes from the FTC’s jurisdiction, applies with full force to tribal lenders. The Court rejected the lender’s request to apply “Indian canons of construction in determining whether a federal law applies to” a tribal lender, because the FTC’s case does not implicate any tribe’s treaties or sovereignty. Both the FTC and the CFPB (see October 1, 2013 Alert) have targeted the payday lending practices of tribal lenders.

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