Merchants Bank Files Interpleader Lawsuit Amid Dispute Over $144 Million Linked to CFPB Judgment
Merchants Bank of Indiana has filed an interpleader action in federal court after receiving conflicting demands over more than $144 million in bank deposits. The competing claims came from the Consumer Financial Protection Bureau (CFPB) and entities associated with businessman J. Paul Reddam.
The lawsuit places the bank in the middle of an ongoing effort by the CFPB to collect on a judgment exceeding $130 million against Reddam and several affiliated companies, including CashCall, Inc. Rather than deciding which party is entitled to the funds, Merchants Bank is asking the court to determine who has the legal right to the money.
Background of the Dispute
The dispute stems from long-running litigation brought by the CFPB against CashCall, J. Paul Reddam, and affiliated entities over alleged violations of federal consumer financial laws.
The CFPB ultimately obtained a judgment exceeding $130 million, which was later affirmed by the U.S. Court of Appeals for the Ninth Circuit. In March 2026, the U.S. Supreme Court declined to review the case, leaving the appellate court’s decision in place.
Following the Supreme Court’s denial of certiorari, the CFPB sought payment from accounts reportedly held at Merchants Bank that are associated with Reddam and his entities.
Conflicting Instructions to the Bank
According to the interpleader complaint, the CFPB instructed Merchants Bank to release funds to satisfy the judgment, asserting that the legal requirements for collection had been met.
At the same time, attorneys representing CashCall informed the bank that they intended to file a motion under Federal Rule of Civil Procedure 60(b) seeking to vacate the amended judgment.
The attorneys also directed Merchants Bank to preserve the accounts and refrain from transferring, liquidating, or otherwise disposing of the funds unless all parties agreed or a court issued further instructions.
The conflicting demands left the bank facing competing legal obligations regarding the same funds.
Bank Turns to an Interpleader Action
Rather than determining which party’s instructions to follow, Merchants Bank filed an interpleader action, a legal procedure that allows a neutral stakeholder holding disputed property or funds to ask a court to determine the rightful recipient.
In its complaint, the bank states that it is willing to comply with the court’s ultimate decision regarding the disputed funds.
Court filings also indicate that Merchants Bank has asked to continue holding the funds while the litigation proceeds, rather than immediately depositing them with the court, subject to judicial approval.
CFPB Collection Efforts Continue
According to the complaint, the CFPB advised the bank that more than 60 days had passed since the Supreme Court declined to hear the appeal, making the judgment enforceable.
The filing further states that after Merchants Bank informed the CFPB about the competing instructions it had received from CashCall’s counsel, the agency indicated it would pursue “all appropriate actions” if the bank failed to comply with its collection efforts.
The complaint does not resolve the dispute over ownership or entitlement to the funds. Instead, it asks the court to determine how the bank should proceed while protecting it from potential liability arising from the competing claims.
What is an Interpleader?
An interpleader action is commonly used when a person or institution holds money or property claimed by multiple parties.
Rather than risking liability by choosing one claimant over another, the stakeholder asks the court to decide who is legally entitled to the disputed assets. This procedure is frequently used by banks, insurance companies, financial institutions, and other custodians holding funds subject to competing legal claims.
If granted, the interpleader process can protect the stakeholder from facing multiple lawsuits over the same property.
What Comes Next
The court will first determine whether the interpleader action may proceed and whether Merchants Bank may continue holding the disputed funds during the litigation.
Separately, CashCall’s anticipated Rule 60(b) motion seeking to vacate the amended judgment will proceed through the federal court process if filed.
The outcome of both proceedings could affect the CFPB’s efforts to collect the judgment and determine the ultimate disposition of the disputed funds.
The case illustrates how financial institutions can become involved in complex post-judgment disputes when multiple parties assert competing rights to significant assets. It also highlights the role of interpleader actions as a procedural tool for resolving competing claims while allowing a neutral stakeholder to seek judicial guidance.
