Federal Court Denies Lender’s Motion to Dismiss in Multistate CFPA Suit

Recently the U.S. District Court for the Eastern District of Pennsylvania denied a lender’s motion to dismiss claims that it engaged in predatory and deceptive lending practices, as alleged in the multistate lawsuit led by the Pennsylvania Attorney General.

As background, Plaintiffs – a group of 5 Attorneys General from Pennsylvania, New Jersey, Washington, Oregon and Washington, D.C.– alleged the lender employed “aggressive and unlawful tactics,” in violation of Federal and State consumer protection laws by charging consumers for add-on products consumers did not agree to buy. 

The lender moved to dismiss, relying on an opinion from the U.S. Court of Appeals for the Fifth Circuit, holding that the CFPB’s funding source is unconstitutional.  That decision is now pending a decision by the U.S. Supreme Court after the CFPB’s appeal. The lender argued that because of the CFPB’s unconstitutional funding source, state regulators cannot provide “lawful” notice of enforcement to the CFPB, because it is an entity that should not exist. The district court rejected this argument, noting that no case had held that if the CFPB’s funding were unconstitutional it would render the CFPA unenforceable by the States, which have “separate and concurrent enforcement authority” under the statute.  Moreover, the district court held that the CFPA’s pre-suit notice requirement was not jurisdictional, and the States would not be barred from suing, even if the notice provision was violated because of the CFPB’s unconstitutional funding.  The district court noted that it need not decide whether the CFPB’s funding was unconstitutional.

The lender also asserted that Pennsylvania was not the proper venue for the multistate suit, because the CFPA requires states suing under the statute to do so in their home state.  The district court disagreed, holding that the statute determined when venue may be proper over a nonresident corporation; it did not narrow venue to limit the territorial confines of state actions. The district court also noted that the States were not prohibited by the CFPA from joining together to seek redress for consumers.

The case is Pennsylvania by Shapiro v. Mariner Fin., LLC, No. CV 22-3253 (E.D. Pa. Jan. 12, 2024).