On November 7, the U.S. District Court for the Northern District of Texas entered an opinion and order in a case involving the CFPB and a consumer lender and its subsidiaries (the defendants) addressing two motions: the Bureau’s motion to strike and the defendant’s motion for partial summary judgment. In this case, the CFPB asserted the defendants made pawn loans to active duty servicemembers and their dependents that: (i) charged interest rates exceeding the Military Lending Act’s (MLA) 36 percent cap; (ii) required arbitration in violation of the MLA; and (iii) failed to provide mandatory disclosures. The CFPB claimed that between June 2017 and May 2021, the defendant issued more than 3,600 prohibited loans to covered borrowers in multiple states, including Arizona, Nevada, Utah and Washington. The CFPB also asserted the defendant’s conduct following its 2016 merger with another company constituted a breach of a 2013 administrative order.

The CFPB’s motion to strike sought to eliminate the defendant’s “bona-fide-error” defense, which the Bureau argued “is only available when a private party is the plaintiff.” The court granted this motion in part, agreeing with the CFPB that the bona-fide-error defense, which protects defendants from civil liability for unintentional violations of the MLA, did not apply in suits brought by federal agencies like the CFPB. The court reasoned that the MLA’s bona-fide-error defense is intended to protect against liability to individual borrowers — not federal agencies. Therefore, the court struck the defendant’s bona-fide-error defense from its answer.

The defendant’s motion for partial summary judgment sought to establish the applicability of the bona-fide-error defense and dismiss the first three counts of the CFPB’s complaint, arguing that the Bureau lacked jurisdiction over its claims. The court denied this motion, stating that the defendant failed to provide sufficient evidence to support its bona-fide-error defense and that “the CFPB did not make ‘judicial admissions’ that rob the Court of jurisdiction.” The court clarified that the CFPB is empowered to enforce the MLA under the CFPA and TILA.

Additionally, the court denied the CFPB’s motion to strike the defendant’s sixth and eighth affirmative defenses, which reserve rights to amend its answer. The court found that these defenses did not prejudice the Bureau in any way.