Federal Judge Dismisses CFPB’s Claims Against Debt Collection Service Providers

9/1/2017 2:01 PM

The judge, in a reversal of his original treatment of the case, sided with defendants, stating the CFPB did not follow the court’s instructions and hindered the deposition process.


A federal judge in Atlanta dismissed the Consumer Financial Protection Bureau’s claims against a software company and four payment processors that allegedly assisted in unlawful debt collection conduct because the CFPB failed to follow the court’s order to provide the defendants with the factual basis for its claims, The Atlanta Journal-Constitution reports.

The original claims are part of a sweeping Fair Debt Collection Practices Act lawsuit filed in 2015 alleging that several related debt collectors engaged in unlawful and abusive debt collection practices in the collection of phantom debt—debt that consumers either do not owe, or that a creditor is legally barred from collecting, ACA International previously reported. Surprisingly, the CFPB’s lawsuit included several of the debt collectors’ service providers, including a software company and payment processors, alleging that they assisted in the unlawful conduct. 

Defendants in the case purchased consumers' personal information from debt brokers and lead generators. They then used Global Connect LLC, a software company that provides hosted dialer services, to leave pre-recorded voicemail messages for millions of consumers, ACA International previously reported.

The CFPB’s claims against Global Connect LLC are among those dismissed by U.S. District Judge Richard Story. The additional defendants in the case include payment processors for Global Connect: Global Payments, Pathfinder Payment Solutions, Frontline and Electronic Merchant Systems.

Story’s decision to dismiss the claims is contrary to his actions in the initial handling of the case, according to an article in The Daily Report.

“When the suit was filed, the judge granted the CFPB a preliminary injunction to stop the robocalls and freeze the assets of the individual defendants and their business operations. Story held that, absent the injunction, the court’s ability to grant financial relief to consumer victims might suffer ‘immediate and irreparable damage’ because of the possibility that debt collectors would transfer, conceal or otherwise dispose of their assets and their business records,” according to the article.

The judge’s order, included in the article from The Atlanta Journal-Constitution, dismissing the claims is the result of opposition from the CFPB during the deposition process that prevented the defendants from taking “meaningful depositions,” it states.

Pathfinder Payment Solutions stated that the CFPB’s suit is “government overreach” and the claims are “frivolous and warrant dismissal,” according to the order.

According to The Daily Report, “The court has consistently held that the CFPB was obligated to sit for those depositions, and that it needed to produce a witness prepared to apprise the defendants of the facts they would face at trial, the judge’s order said. “But the CFPB has put up as much opposition as possible at every turn. And in doing so, it has recycled many of the same arguments over and over.”

The judge noted that the CFPB’s actions “demonstrate a willful disregard for the court’s instructions,” according to the article.

The order states the CFPB did not provide knowledgeable witnesses for the depositions, that the witnesses used “memory aids to deliver rote, sometimes unresponsive answers to Global Payments’ questions.” The defendants also “objected to the CFPB’s counsel’s extensive use of privilege objections to prevent the witness from answering questions about the facts the CFPB was relying on to support its allegations,” according to the order.

John Da Grosa Smith, counsel for Pathfinder Payment Solutions, told The Daily Report, “For years now, the Consumer Financial Protection Bureau has attempted to legislate by litigation and to hold business to impossible standards. But when it came time for the bureau to show its cards, it chose instead to repeatedly and willfully violate the court’s clear instructions to provide live testimony in support of its claims. The court’s order demonstrates the bureau is not above the law.”

Story’s order dismissing the CFPB’s claims against the debt collection service providers concludes that reopening the depositions would not be worthwhile.

“That is especially true given the CFPB’s continued use of privilege objections in response to questions that the Court expressly identified as permissible,” it states.

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