Industry observers say that the Consumer Financial Protection Bureau is showing a clear focus on cracking down on online lenders—using its authority to punish “unfair and deceptive” practices—based on claims that originated in states.

They cite a recent series of actions that the CFPB and four state attorneys general announced against California-based CashCall, Inc. State officials say the company violated usury laws through its partnership with Western Sky Financial, a high-cost online lender under intense legal scrutiny. The CFPB alleges that CashCall’s collection of payments on invalidated Western Sky loans was “unfair and deceptive.”

“The most important thing is that the CFPB is now, for the first time, basically piggybacking federal claims off of state law. It means they’re putting the full force of the federal government to compel compliance with state law,” said Jeremy T. Rosenblum, a Ballard Spahr partner who leads the firm’s Consumer Financial Services Group. “That is truly a sweeping assertion of jurisdiction by the CFPB.”

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Consumer Financial Services