The Consumer Financial Protection Bureau (CFPB) late last week filed a response in an FDCPA enforcement action that marked a bit of a shift in tone. The CFPB took direct aim at the defendant’s claims, going so far as to bluntly call some of their reasoning “simply wrong.”
The CFPB was responding to a motion to dismiss the case from Frederick J. Hanna and Associates. In July, the CFPB filed a lawsuit accusing the law firm and its three principal partners of operating “like a factory,” producing hundreds of thousands of debt collection lawsuits against consumers on behalf of its clients, mainly major credit card-issuing banks and debt buyers.
Hanna filed its motion to dismiss last month. In that motion, the firm said that the Bureau did not have the authority to regulate the practice of law. Because the CFPB’s allegations exclusively involve the firm’s actions in filing lawsuits and supporting the suits with affidavits, the CFPB does not have the proper standing to regulate the actions, Hanna asserts.
The CFPB’s response, filed October 3, broke down the arguments presented by Hanna in its motion to dismiss.
First, the CFPB reasserted that it has the right to enforce actions taken by collection law firms under the Dodd-Frank Consumer Financial Protection Act of 2010 (CFPA). Although there is a practice of law exclusion under that Act, the CFPB said that it does not apply because it does have authority “over attorneys who collect debts from consumers who are not their clients.” The Bureau said that “the exclusion applies only to attorneys who provide legal advice or services to consumers.”
Hanna had argued that “preparing and filing collection lawsuits is…not a ‘consumer financial product or service’.” The CFPB countered that “This assertion, offered without support or even explanation, is simply wrong.”
In addressing Hanna’s assertion that the “meaningful involvement” doctrine for collection attorneys has applied only to collection letters, the CFPB noted that it considers a debt collection lawsuit to be a communication under the FDCPA. But taking it further, the Bureau said “even if the plain language of the statute did not require that complaints be subject to the same meaningful-attorney-involvement requirement that has long been applied to dunning letters, Defendants are wrong that the ‘rationale’ for that requirement is applicable only in that context.”
The CFPB also offered an interesting defense of its lawsuit following the “taking it further” logic.
Hanna noted in its motion to dismiss that the FDCPA carries a one-year statute of limitations under which to bring claims. The CFPB countered that the one-year limitation applies only to private actions brought by consumers and provided numerous examples in the legislative history of the FDCPA. But it took the argument further.
The CFPB wrote that even if the specific text of the FDCPA was not clear, a long-running principle of statutory construction would allow it to take enforcement actions on acts older than a year: quod nullum tempus occurrit regi – “Time does not run against the King.” The CFPB wrote that “In the absence of a congressional enactment clearly imposing a limitations period, the United States, in its governmental capacity, is not subject to one.”
There are countless other examples of general testiness in the response. And to be fair to the CFPB, its response is similar in tone to the motion to dismiss. This case promises to be one to watch in the ARM industry. Up next: Hanna’s response to the CFPB’s response.