The case is on hold pending a U.S. Supreme Court decision in a case on the Federal Housing Finance Agency’s leadership structure, similar to Seila Law v. Consumer Financial Protection Bureau.
8/19/2020 15:00
A 2019 case filed by the Consumer Financial Protection Bureau against collection law firm Forster & Garbus LLP for alleged violations of the Fair Debt Collection Practices Act is on hold pending the U.S. Supreme Court’s decision in Collins v. Mnuchin, which challenges the leadership structure of the Federal Housing Finance Agency (FHFA).
Judge Sandra Feuerstein from the U.S. District Court for the Eastern District of New York stayed the CFPB v. Forster & Garbus case while the Supreme Court considers Collins v. Mnuchin. The Collins v. Mnuchin case was granted for consideration by the Supreme Court during its summer term, according to an article on the SCOTUS Blog.
Challengers in Collins v. Mnuchin asked the Supreme Court to consider the outcome in the case if the FHFA’s structure is ruled to be unconstitutional after the court’s decision in Seila Law v. Consumer Financial Protection Bureau, according to the SCOTUS blog.
On Aug. 11, the CFPB filed a motion to reopen the case, which the judge denied. Two days later, on Aug. 13, the CFPB filed a motion for the judge to reconsider the denial.
“The bureau respectfully submits that defendant’s filing provided an incomplete and inaccurate explanation of the issues presented in Collins—which the bureau intended to address if and when the court invited the fuller briefing on the subject that defendant requested,” the motion states. “Absent such briefing, the court regrettably was left with an inaccurate impression of the relevance that Collins could have to this case. Collins will not, in fact, address any question at issue here—and therefore provides no basis to further delay proceedings in this case.”
In July, the CFPB also filed a motion for the judge to reopen the case after the U.S. Supreme Court reached its decision in Seila Law LLC v. Consumer Financial Protection Bureau. The motion was denied pending a decision in the Collins case.
In Seila Law, the Supreme Court found that the CFPB’s single director structure is unconstitutional, but the provision allowing the removal of the CFPB director only “for cause” is severable from the rest of the statute. As such, the CFPB will continue to exist but its construct will change, and it will be easier to select CFPB leadership based on political affiliation, ACA International previously reported.
The CFPB also ratified most regulatory actions the bureau took from Jan. 4, 2012, through June 30, 2020, following the decision in Seila Law. The ratification of previous regulatory actions provides the financial marketplace with certainty that the rules are valid in light of the Supreme Court decision in Seila Law, ACA previously reported.
The bureau stated in its Aug. 13 motion for reconsideration that, after the ratification order was issued, “there is no question that this enforcement action may now proceed.”
The U.S. District Court for the Eastern District of New York’s stay in the case remains in place for now, but the parties have not finished arguing about whether it will remain. ACA is following the case and will provide updates in ACA Daily.
ACA also previously reported on the Forster & Garbus case.
Background on the case includes:
The CFPB alleged the New York-based law firm violated the FDCPA by attempting to collect consumer debts without meaningful attorney involvement in reviewing the accounts since at least January 2014.
Last year, the firm issued a statement on the allegations, noting its policies and procedures for compliance with federal and state standards.
The CFPB’s complaint also alleges that Forster & Garbus violated the Consumer Financial Protection Act’s prohibition against deceptive acts and practices by making such representations to consumers through its lawsuits, according to a news release.
The bureau seeks an injunction against Forster & Garbus, as well as damages, redress to consumers, disgorgement of ill-gotten gains, and the imposition of a civil money penalty.
Forster & Garbus notes in its statement that “the FDCPA does not define, or even refer to, this ‘meaningful attorney involvement’ doctrine anywhere in its text, nor is there any binding authority which governs how the doctrine would apply to the legal pleadings at issue here, which were in fact filed by attorneys of our firm …. Both Director [Kathy] Kraninger and prior Acting Director [Mick] Mulvaney have acknowledged that the CFPB should not engage in ‘regulation by enforcement’ yet the filing of this lawsuit against our firm suggests that this unfortunate trend is continuing. F&G policies and procedures have nonetheless exceeded the requirements of the ‘ad hoc’ expectations of the CFPB. Forster & Garbus is fully committed to defending its ethical and compliance practices and we look forward to our day in court.”
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