SOUTH
BRONX/SDNY, Oct 6
– How
far will the Federal Reserve go to
redact its own question to a high-cost
lender trying to buy a bank? This year
Federal Reserve and OCC have entertained
applications by Enova, the parent of high
cost lender CashNetUSA, to acquire
Grasshopper Bank, already deeply engaged
in AI banking.
Inner City Press requested documents including the Federal Reserve's communications with Enova, under the Freedom of Information Act. The Fed denied the request, then on Inner City Press' appeal provided entirely redacted pages and a denial, which said if you don't agree, you can sue.
Inner City Press
did, and won - the
Magistrate Judge
to whom the case
was assigned,
after viewing the
document
the Fed
submitted for in
camera review,
ruled
the redactions
unwarranted
and ordered
the information
produced
to Inner City
Press by
October 2.
But this is
the Federal
Reserve. They
wrote in to
belatedly
argue
that the Magistrate
Judge exceeded
this authority
and must
vacate his
order. He did
- so
Inner City
Press has written
to the
District Judge
to affirm him.
District
Judge Analisa
Torres on
October 5
amended the
reference to
send the Fed's
summary
judgment
motion to
Magistrate
Judge Robert
Lehrburger for
a Report and
Recommendation,
and he issued
it the next
day, here,
in
"abbreviated
form" because
of "time
sensitivity."
He again found
that "most of"
the eight-page
Enova letter
"is not
information
subject to
FOIA
exemptions 4
and 6,"
consisting
largely of
"generic or
otherwise
non-confidential
requests,
instructions,
and
descriptions,"
and that the
Board's
blanket
redaction "far
exceeds" what
is warranted.
He recommends
that the Board
be required to
"promptly
produce" a
version
redacting only
"targeted,
specific,
discrete"
information
such as
individual
names,
addresses, and
dollar
amounts.
The
Fed's own
conduct is the
context. It
redacted its
eight-page
letter in full
in February.
It gave up
part of it
only after a
lawsuit and an
order for in
camera review.
Four days
after Judge
Lehrburger
found its
redactions
overbroad, it
asked him to
vacate his
ruling,
arguing for
the first time
that he lacked
authority to
decide the
matter.
Because of the
14-day period
for objections
and another 14
days for
responses,
Judge Torres
is unlikely to
adopt the
recommendation
before early
November. The
letter
concerns an
application
that Enova has
since
withdrawn. A
decision on
what the
public may see
of the Board's
questions
arrives only
after the
transaction
they were
meant to
inform is
gone. Watch
this
site
How we got
here: On
July 8, the
Magistrate
Judge
set an initial
pretrial conference
for September 10,
2026 at 9:30 am. At
the time, Inner City
Press asked
that the eight
fully redacted
pages be
provided to
the Judge for
in camera
review. That
was ordered -
and then the
Assistant US
Attorney asked
to be able to
brief why the
Fed should NOT
have to show
the pages,
even to the Judge.
That filing was
due at on
September 10 - and
Inner City
Press
immediately responded
into the
docket.
On September 14
Judge Lehrburger
ruled:
"Having
considered the
parties'
filings (Dkts.
18, 19), the
Court, in its
discretion,
finds it
appropriate
for Defendant
to submit for
in camera
review an
unredacted
version of the
document at
issue at the
same time
Defendant
files its
papers
opposing
disclosure. A
number of
factors lead
to the Court's
conclusion,
including the
nature of the
exceptions
claimed (e.g.,
confidential
business
information;
not, e.g.,
national
security);
there being
only a single,
short (8-page)
document at
issue; the
apparent
extent of
redaction
(i.e.,
virtually
total); and
the relative
urgency of
time in light
of the
pendency of
the decision
to which the
document
relates. The
cases cited by
Defendant
either speak
to the
question of
whether the
court must
conduct in
camera review,
or are
distinguishable
for other
reasons.
Accordingly,
on the same
date that
Defendant
files its
papers
opposing
disclosure,
Defendant
shall submit
for in camera
review an
unredacted
version of the
document at
issue. (HEREBY
ORDERED by
Magistrate
Judge Robert
W.
Lehrburger)."
Order free on CourtListener
here
On
September 14
Enova
announced: "it
has withdrawn
its
applications
with the
Office of the
Comptroller of
the Currency
and the Board
of Governors
of the Federal
Reserve System
related to the
proposed
acquisition of
Grasshopper
Bancorp." Now the
question letter
should be
released in
full asap.
The
earlier order:
"By
September 11,
2026, the
Government
shall file a
letter
regarding the
propriety of
the Court’s
requesting
submission of
the fully
unredacted
document at
issue for in
camera review
at the time
the Government
files its
opening letter
brief. Any
response from
Plaintiff
shall be filed
by Tuesday,
September 15,
2026. 2. By
September 24,
2026, the
Government
shall file a
letter brief
of no more
than 5 pages
(excluding
exhibits and
declarations)
providing its
arguments
against
disclosure. 3.
Plaintiff
shall file his
opposing
letter brief
of no more
than 5 pages
(excluding
exhibits and
declarations)
by October 8,
2026
(Plaintiff may
of course file
his opposition
any time
before that
deadline). 4.
Any reply
shall be filed
by the
Government
within 7
calendar days
from the day
Plaintiff
files his
opposition
brief."
On September
24 after DOJ
filed its
motion, Inner
City Press
replied the same
day, including Fed
documents on
CommerceOne
and Bank of
Nova Scotia.
The next
day Judge
Lehrburger
ruled. Having
reviewed the
unredacted
letter in
camera, he
found it
"readily
apparent...
that most of
it is not
information
subject to
FOIA
exemptions 4
and 6" — and
issued his
decision
without
briefing from
either side
beyond the
Board's own
opening
letter, noting
plainly: "The
Court has also
received and
reviewed
Plaintiff's
opposition but
was able to
reach the
instant
decision
without it."
The letter,
the Court
found, is
mostly
"generic or
otherwise
non-confidential
requests,
instructions,
and
descriptions
of what
information
was already
provided" —
with only "a
handful of
references" to
genuinely
private
material, like
addresses or
specific
personal
dollar
figures, that
"may properly
be redacted."
Everything
else, the
order states,
was withheld
under "current
blanket
redaction...
far too
overbroad,"
citing
Intercept
Media Inc. v.
National Park
Service and
New York Times
Co. v. DOJ,
both finding
the same
pattern of
agencies
hiding
non-exempt
material
"under the
guise of
Exemption
4." The
Board had
until October
2, 2026, to
produce a
version
redacting only
what the order
actually
permits —
specific
personal
identifiers,
not the eight
pages
wholesale.
Seven months
after the
original
February
request, and
after a
lawsuit that
never should
have been
necessary, the
Fed's own
questions to
Enova about
who would run
a bank holding
company for a
company the
CFPB fined $15
million for
repeat
consumer-protection
violations were,
mostly, about
to become
public.
Except the Fed
belatedly
raised its argument
that the
Magistrate
Judge did not
have jurisdiction,
and got the
unsealing
order vacated.
Inner City
Press an
hour later wrote
to the District
Judge to
affirm it, or
view the eight
entirely
withheld pages
herself
and rule. Enough
is enough.
Watch
this site.
On
September
2, after
several rounds
of meet-and-confer,
Inner City
Press and the
Assistant US
Attorney submitted
a joint letter,
here.
Inner City
Press has
requested that
the hearing be
in-person in
500 Pearl
Street, and has
noted that the
Federal Reserve
failure to
represent
itself is
leading to additional
delay on the
February 2026
FOIA request
about the
Fed's
questions to Enova, 8 pages redacted
in full now in
the record, here.
On
July 6, the
Attorneys General of
New York,
California,
Colorado,
Connecticut,
Illinois, Maine,
Maryland,
Massachusetts,
Minnesota, Nevada,
New Jersey, North
Carolina, Oregon and
Vermont, along with
the Hawaii Office of
Consumer Protection,
wrote to the Fed's
Benjamin McDonough
demanding a public
hearing and urging
denial absent
assurances that
Enova's application
"is not merely an
effort to evade"
state usury laws.
Enova's CashNetUSA
and NetCredit loans
run to APRs above
200% — Enova's own
example being a $600
loan repaid at
nearly 300% APR —
with charge-off
rates over 50%.
Congress overturned
the OCC's "true
lender" rule
precisely to stop
nonbanks from
evading state usury
caps through bank
partnerships. And
Enova proposes to
move Grasshopper's
headquarters from
New York, whose
usury limits bind
it, to Utah, which
has none. In the
AGs' words, Enova
"seeks to evade
Congress and
circumvent state
limits on high-cost
or usurious
lending."
Inner City
Press / Fair Finance
Watch on July 8
filed a supplemental
comment to the Fed
tying the threads
together: the very
concerns fifteen
states' chief law
enforcement officers
raise —
charter-based
evasion, the Utah
move, 50%-plus
charge-offs funded
by insured deposits
— are presumably the
subjects of the
Fed's additional
information letters
to Enova. The
letters the Fed has
redacted in their
entirety, down to
its own questions. "In
this context, the
application should
not be acted on
other than denial.
And, again, the
Additional
Information letter
should be
released. This is
especially true
given the new
letter by state
Attorneys General.
The Fed should
consider that
letter - and this
one."
Among
with the denial, the
Fed sent Inner City
Press entirely
redacted pages from
its Additional
Information letter
to Enova, which we
put on our
DocumentCloud here
Inner
City Press filed
its
FOIA lawsuit
against the Fed
for its
communications
with Enova - copy
of complaint,
which went live
on PACER on June
1, on
CourtListener,
here.
After the
Fed had been
mailed the complaint,
and its lawyers
told about it by
email, on June 6
Grasshopper Bank
filed to
remove to SDNY
a case filed
against it by
its former
Compliance
Officer, who
alleged
discrimination
including
false charges
of
having "taken
an extended
trip to Egypt," and said it
was untrue.
And
discriminatory.
The case is
26-cv-4795;
the FOIA case
is 26-cv-4556:
Lee v.
Board of
Governors of
the Federal
Reserve
System,
1:26-cv-04556
(Torres /
Lehrburger)
