Indiana’s third-largest bank has taken the unusual step of suing both the Consumer Financial Protection Bureau and its own account holders over $144 million in disputed funds.
Merchants Bank of Indiana filed the interpleader complaint after finding itself caught between two parties making conflicting demands over money held in accounts belonging to J. Paul Reddam and his associated entities.
Reddam holds accounts through his various entities with more than $144 million on deposit at the Indiana bank, according to the complaint.
The CFPB previously sued Reddam alongside his entities, including CashCall, Inc. and Absolutely Zero Corporation, and secured a judgment against him exceeding $130 million.
Reddam appealed that ruling and lost, with the Ninth Circuit upholding the judgment in CFPB v. CashCall, Inc., 135 F.4th 683 (9th Cir. 2025).
The Supreme Court subsequently denied certiorari to review the Ninth Circuit’s decision on March 2, 2026, clearing the way for the CFPB to seek collection of the funds.
The CFPB moved to collect, directing Merchants Bank to hand over the money more than 60 days after the Supreme Court denied cert, arguing the judgment was final and enforceable.
However, lawyers for CashCall sent a letter stating they “intended to file a motion pursuant to Federal Rule of Civil Procedure 60(b) to vacate the Amended Judgment,” simultaneously demanding that Merchants Bank “maintain the status quo and refrain from taking any action to transfer, liquidate, close, re-register, or otherwise dispose of any collateral in or associated with the Pledged Account” without joint instructions or a court order.
Reddam had also directly instructed the bank not to transfer any funds to the CFPB, placing the institution squarely between two conflicting legal demands from opposing parties.
Merchants Bank’s general counsel informed the CFPB of the conflicting instructions, at which point the regulator threatened to take “all appropriate actions” against the bank if it failed to comply.
Facing legal exposure from both sides, the bank opted to file the interpleader complaint, effectively agreeing to pay whoever the court determines is rightfully entitled to the funds.
In a typical interpleader action, the filing party deposits the disputed funds with the court, though Merchants Bank has asked to retain the money while proceedings are ongoing.
The case underscores the serious operational risks banks face when regulators pursue enforcement actions against major account holders, with institutions potentially facing liability no matter which party’s demands they choose to follow.