The Bureau of Consumer Financial Protection urged the Ninth Circuit Court of Appeals to reinstate a $200 million penalty against a payday lender, arguing that a lower court judge made a mistake when determining that the lender did not have to pay restitution to those who were scammed.
The lower court judge ruled the $287 million penalty — a $51 million fine and $230 million in restitution to borrowers — that was originally levied against CashCall by the BCFP was “excessive,” and that the agency failed to meet the burden of proof in assessing such a dramatic penalty and lowered the fee to $10 million. The $10 million fine is the maximum allowed under the Consumer Financial Protection Act.
The BCFP appealed the ruling.
CashCall was found to have illegally violated state usury laws by claiming an affiliation with a Native American tribe. But since CashCall did not intentionally deceive its customers, assessing a fine over and above the statutory limits was not required, the lower court judge ruled.
The lower court incorrectly used net profits instead of net revenues when determining the amount of restitution, the BCFP argued in its brief.
“Congress authorized restitution to compensate consumers affected by unlawful financial-services practices — but by denying restitution based on defendants’ good faith, the district court improperly converted that compensatory remedy into a punishment for bad intent,” the agency said in its brief. “”Under the district court’s reasoning, consumers get nothing, while defendants get to deduct the costs incurred committing their illegal acts.”
