Case in which CFPB came to financial institutions’ defense dismissed

An Illinois federal judge has dismissed a proposed class action lawsuit that alleged that two Midwestern banks failed to provide repayment disclosures to borrowers, in a case that was unique because the CFPB came to the defense of the financial institutions.

U.S. District Judge Manish Shah of the Northern District of Illinois, had asked the bureau to comment on whether the Bank of Orrick violated federal requirements to provide borrower Jose Lopez with disclosures, including how long it would take for him to repay his loan if he only paid the monthly minimum payment.

The CFPB filed an amicus brief on July 1 stating that the type of line of credit that Lopez received through Kendall Bank from the Bank of Orrick in 2022 was exempt from such requirements. Lopez obtained an open-end “Vault” line of credit from the bank, not a credit card account. (“Vault” is a trade name used by the bank.).

Lopez had alleged that he was not receiving the required disclosures with his statement each month; he said that violated Section 127(b)(11) of the Truth in Lending Act , 15 U.S.C. 1637(b)(11), and Regulation Z. He was attempting to pursue the claim on behalf of all persons in Illinois who received similar statements with their “Vault” credit lines.

In its amicus brief, the CFPB said that since 2010, the disclosure obligations have only applied to credit card accounts under an open-end consumer credit plan.

The judge agreed, saying that the bank’s omission of minimum repayment disclosures for Lopez’s account is consistent with Regulation Z. The regulation properly limits repayment disclosures to credit cards, the judge said.

We think the law is clear and would encourage the CFPB it to file amicus briefs supporting consumer financial service providers on a more regular basis. And, we once again call on the CFPB to revive the best vehicle for interpreting the federal consumer financial laws–the Official Staff Commentaries. The industry and consumers would benefit from such clarity and consistency.