Merchants Bank Files $144M Interpleader Suit Amid CFPB Dispute
Merchants Bank of Indiana sued account holders and the CFPB in a $144 million interpleader action.
Why it matters: This case highlights emerging legal strategies where banks must resolve conflicts between regulatory demands and account holder instructions, crucial for banking and compliance lawyers.
- Merchants Bank filed an interpleader suit involving $144 million.
- The CFPB won a $130 million+ judgment against J. Paul Reddam and related entities, including CashCall, Inc.
- Reddam’s entities have appealed and seek to vacate the judgment.
- CFPB demands the bank release funds to satisfy the judgment; Reddam instructs the bank otherwise.
Merchants Bank of Indiana has initiated an unusual interpleader lawsuit to resolve a dispute over $144 million in deposited funds. The bank named both the account holders and the Consumer Financial Protection Bureau (CFPB) as defendants.
The CFPB previously obtained a judgment exceeding $130 million against J. Paul Reddam and his entities, including CashCall, Inc. However, Reddam’s entities are currently appealing the judgment and challenging it through a motion to vacate. This legal uncertainty has led to conflicting instructions being issued to Merchants Bank.
While the CFPB has demanded that the bank release the disputed funds to satisfy its judgment, Reddam has countermanded that directive, instructing the bank not to comply with the CFPB’s demand. The resulting stalemate prompted Merchants Bank to file the interpleader action, asking the court to determine the rightful claimant to the $144 million.
Attorney Eric J. Troutman of Troutman Amin, LLP commented that the CFPB’s directive has persisted for over 60 days since the Supreme Court denied certiorari to review the Ninth Circuit’s ruling against CashCall, emphasizing the prolonged nature of the dispute.
This case sheds light on the complexities financial institutions face when regulatory bodies and clients provide conflicting demands over substantial sums, making it a notable example for legal professionals involved in banking litigation and regulatory compliance.
By the numbers:
- $144 million — Amount disputed in Merchants Bank's interpleader lawsuit
- $130 million+ — CFPB’s judgment against J. Paul Reddam and his entities
- 60 days — Duration since Supreme Court denied certiorari to review Ninth Circuit ruling on CashCall