CashCall ordered to pay $134 million in a win for the CFPB

Bloomberg News

An appeals court ruled that online lender CashCall must pay $134.1 million in restitution to consumers, yet another victory for the Consumer Financial Protection Bureau in its suit against the high-cost lender — a legal case that it has been fighting since 2013.

On Friday, a panel of the U.S. District Court of Appeals for the 9th Circuit ruled that CashCall had waived its right to a jury trial and that its other challenges "lack merit." CashCall, an Orange, California, lender of unsecured, high-interest loans, was sued by the CFPB for engaging in a so-called "rent-a-bank" scheme to avoid state usury caps by claiming an affiliation with a sovereign native American tribe. 

The CFPB originally sued CashCall, its owner J. Paul Reddam, WS Funding LLC and Delbert Services Corp., alleging the lender had engaged in an "unfair, deceptive, or abusive act or practice," by partnering with now-defunct Western Sky Financial and illegally collecting interest and fees on small-dollar loans that were invalid under state law.

The three-judge appeals panel concluded that CashCall had not objected to a bench trial in its appeal and had "made an express, knowing, and voluntary waiver of its right to trial by jury," Judge Eric D. Miller wrote in a 28-page opinion. The case proceeded to a bench trial, in which CashCall participated without objection.

CashCall "may also have made a strategic judgment that, having been found liable for employing deceptive practices to victimize thousands of consumers, it might fare poorly before a jury," Miller wrote. "We have never held that a party's legal error can vitiate its waiver of a jury-trial right, or that a party must demonstrate a correct understanding of the law for its waiver to be effective."  

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The panel also rejected CashCall's contention that the CFPB's statutory funding mechanism is inconsistent with the appropriations clause. Several companies that have been sued by the CFPB have claimed that its actions are invalid because the bureau does not receive annual appropriations from Congress but instead is authorized to draw from the Federal Reserve System whatever amount it deems necessary to carry out its duties.  

The panel found that the funding argument "is squarely foreclosed by recent Supreme Court precedent holding that the Bureau's statutory funding mechanism is consistent with the Appropriations Clause."

Though the court case has been going on for a dozen years, the CFPB won an early victory in 2016, when the U.S. District Court for the Central District of California ruled in the bureau's favor. CashCall appealed and in 2018, the same court rejected the CFPB's request for over $280 million in penalties, including $235 million in restitution for consumers. At the time, the judge ordered CashCall to pay only a $10.2 million fine and zero relief to its customers.

Back then, the judge said that the CFPB had failed to justify that the relief it was seeking from CashCall was equitable to the damages caused to consumers. He also concluded that the consumer bureau had fallen short in proving that the lender misled consumers who took out personal loans of between $700 and $10,000. The CFPB appealed.

In 2023, a judge in the same district ordered CashCall and its defendants to pay $134 million in restitution and $33 million in civil penalties, and CashCall appealed again.