On Friday, PHH filed its opening en banc brief with the D.C. Circuit in the rehearing of its appeal of Director Cordray’s June 2015 decision that affirmed an administrative law judge’s (ALJ) recommended decision concluding PHH had violated RESPA and increased the ALJ’s disgorgement award from over $6.4 million to over $109 million.  The rehearing was sought by the CFPB after a divided D.C. Circuit panel ruled that the CFPB’s single-director-removable-only-for-cause structure is unconstitutional and severed the unconstitutional provision to make the CFPB Director removable without cause by the President; rejected Director Cordray’s new RESPA interpretation and held that even assuming that his interpretation was consistent with RESPA, the CFPB’s attempt to apply that new interpretation retroactively violated due process; held that statutes of limitations apply to CFPB administrative enforcement actions; and remanded to the CFPB for further proceedings consistent with the panel’s decision.

In its opening brief, PHH argues that the CFPB’s “unprecedented independence from the elected branches of government violates the separation of powers” and that because the CFPB’s “constitutional infirmities extend far beyond limiting the President’s removal power…the proper remedy is to strike down the agency in its entirety.”  According to PHH, the Dodd-Frank “for-cause removal provision is not severable from the rest of the provisions establishing the CFPB because severance would create a new agency unrecognizable to the Congress that passed Dodd-Frank.”  PHH contends that the court cannot avoid the separation-of-powers issues “simply by adopting the panel’s statutory holdings and remanding to the CFPB, because this Court cannot remand a case to an unconstitutional agency.”  PHH asserts that such issues can only be avoided “by vacating the CFPB’s order without remand, so that the CFPB would not be free to resume proceedings against PHH.” (emphasis provided).

In its order granting the CFPB’s petition for rehearing en banc, one of the issues the court ordered the parties to address was what the appropriate disposition would be in PHH if the court were to hold that the ALJ in Lucia v. SEC was an inferior officer.  In Lucia, a panel of the D.C. Circuit held that because the SEC’s ALJ was an “employee” rather than “inferior officer” who must be appointed in accordance with the Appointments Clause of the U.S. Constitution, the ALJ’s appointment by the SEC’s Office of Administrative Law Judges rather than an SEC Commissioner was constitutional.  The D.C. Circuit granted a petition for rehearing en banc in Lucia and, as noted below, has scheduled oral argument in that case and in PHH for the same day.

Responding to the issue posed by the D.C. Circuit, PHH argues in its brief that if the court holds the ALJ in Lucia was improperly appointed, then the ALJ in its case was also an “inferior officer” who was not appointed in accordance with the Appointments Clause.  As a result, the entire hearing before the ALJ was invalid, Director Cordray’s order would need to be vacated, and “any future proceeding must begin afresh before a constitutionally structured agency but also before a valid adjudicator.”  PHH further argues that merely restarting the current proceeding still would not provide PHH with full relief because “the unconstitutional taint stemming from the initial authorization of the Notice of Charges would continue to infect this matter.”  PHH asserts that for this reason, the court “must decide PHH’s separation-of-powers challenge even if the ALJ was improperly appointed.”

With regard to the RESPA issues, PHH contends they “should not properly be disputed” before the en banc court “and any en banc opinion should simply reinstate the panel’s statutory rulings.”  It also observes that the RESPA issues “plainly were not en banc-worthy” and Director Cordray’s RESPA interpretation, if adopted by the en banc court, “would create a circuit split with every other court to have considered RESPA’s proper scope.”  Nevertheless,  PHH states that “[i]n an abundance of caution and in light of the critical importance of the RESPA issues to PHH and to the entire settlement-services industry…PHH addresses those issues directly [in its brief] to demonstrate that there is no legitimate basis to revisit the panel’s statutory rulings.”

Amicus briefs in support of PHH were filed on Friday by:

The RD Legal amici are defendants in an enforcement action filed by the CFPB and the New York Attorney General last month alleging that a litigation settlement advance product offered by RD Legal is a disguised usurious loan that is deceptively marketed and abusive.  (In their brief, the RD Legal amici claim that the action was filed in retaliation for a preemptive challenge to the CFPB’s jurisdiction filed by RD Legal.)  State National Bank of Big Spring and the other amici on its brief are the plaintiffs in a separate lawsuit pending in D.C. federal district court challenging the CFPB’s constitutionality.  The State National Bank of Big Spring plaintiffs previously filed an unsuccessful motion with the D.C. Circuit seeking to intervene in the PHH en banc rehearing.

In their amicus brief, the Republican state AGs argue that separation of powers creates a structural check against the aggregation of power on the federal level and protects the role of the states in the federal system by limiting the range of permissible federal action and ensuring federal power can only be wielded by officials who are politically accountable.  A group of Democratic AGs from 16 states and the District of Columbia filed an unsuccessful motion with the D.C. Circuit seeking to intervene in the PHH appeal.  Among the arguments made by the Democratic AGs in support of their motion was that their intervention was necessary because the Trump Administration might not defend the CFPB’s constitutionality.

Except for the brief filed by the ABA and twelve other trade groups which addresses only the merits of PHH’s RESPA arguments, the amicus briefs only address the CFPB’s constitutionality and argue that the CFPB is unconstitutionally structured because of the CFPB Director’s expansive powers and insulation from Presidential and Congressional oversight.  (ACA International’s brief includes the argument that, in addition to being insulated from accountability, the CFPB’s funding mechanism also raises a conflict of interest.  According to ACA, the civil penalty fund “creates a perverse incentive for the Bureau to use its enforcement actions as a funding mechanism, where the Bureau is both prosecutor and beneficiary.”)

The ABA’s brief states that even though amici “do not understand the Court to have granted en banc review to reconsider the panel’s straightforward resolution of the RESPA and fair notice questions,” they are nonetheless “filing this brief out of an abundance of caution because [such] questions addressed by the panel are of critical importance to them and their members.”  The ABA amici argue that the CFPB “misread RESPA, overturned decades of settled interpretations without any notice, and disrupted a large sector of the economy.”  They assert that the panel’s decision “correctly restored the status quo” and urge the en banc court “to let that decision stand.”

Also on Friday, the D.C. Circuit entered an order allowing each side 30 minutes at the en banc oral argument scheduled for May 24, 2017.  The order also indicates that the oral argument in Lucia v. SEC, also scheduled for May 24, will be heard first to be followed by a “short recess” before the argument in PHH.  Finally, the order confirms that the en banc panel will consist of eleven judges, including Senior Judge Randolph.  In addition to Senior Judge Randolph, four of the other panel members were appointed by a Republican president.


The CFPB has filed an amicus brief in the U.S. Supreme Court in support of the respondent/consumer in Midland Funding, LLC v. Aleida Johnson, a decision of the Eleventh Circuit that held Midland’s alleged filing of an accurate proof of claim in the consumer’s bankruptcy case on a time-barred debt violated the FDCPA.

In its brief, the CFPB argues that the Supreme Court should reject Midland’s arguments that the filing of a proof of claim that is accurate (i.e. provides correct information about an unpaid debt) but is for a debt that is time-barred does not violate the FDCPA, and even if the filing does violate the FDCPA, the Bankruptcy Code (Code) would preclude such application of the FDCPA.  According to the CFPB, nothing in the Code allows a creditor to legitimately file a proof of claim that it knows is subject to disallowance under the Code because it is time-barred.  The CFPB also argues that because a debt collector implicitly represents that it has a good faith basis to believe its claim is enforceable in bankruptcy when it files a proof of claim, the filing is misleading and unfair in violation of the FDCPA when the collector knows the claim is time-barred and therefore unenforceable in bankruptcy.

With respect to Midland’s preclusion argument, the CFPB asserts that Code does not preclude an FDCPA action based on the filing of a proof of claim for a time-barred debt.  According to the CFPB, treating Midland’s alleged conduct as an FDCPA violation would not penalize Midland for conduct the Code authorizes and would not otherwise create any conflict between the FDCPA and the Code.

A group of 21 current and former members of Congress and a group of 10 consumer advocacy organizations have filed amicus briefs in support of the CFPB’s petition filed with the D.C. Circuit seeking a rehearing of its decision in CFPB v PHH Corporation.

Under D.C. Circuit Rules, “[n]o amicus curiae brief in response to or in support of a petition for rehearing en banc will be received by the clerk except by invitation of the court.”  Nevertheless, the two groups filed their briefs together with motions requesting an invitation from the court.

In its response to those motions, PHH “take[s] no position on the question whether the Court should invite amicus briefs on the rehearing petition and thus on the merits of the motions.”   However, PHH states that “the submission of the briefs together with the motions appears to conflict with the plain language of [the Circuit Rule].”  PHH asserts that allowing potential amici to submit briefs prior to an invitation “undermines the purpose of the Rule” and asks the court to clarify if its Rule “permits the submission of amicus briefs at the rehearing stage in this manner.”

PHH also comments that the court “need not invite or accept for filing briefs that are redundant of the CFPB’s petition or of the amicus brief that the Court has invited from the Solicitor General.”  In an order filed on November 23, 2016, the D.C. Circuit directed PHH to file a response to the CFPB’s petition and invited the Solicitor General to file a response.

Both amicus briefs contend that the D.C. Circuit’s decision threatens the CFPB’s ability to fulfill its consumer protection role and was wrongly decided because it is at odds with U.S. Supreme Court precedent.

The CFPB has filed an amicus brief in support of the plaintiff in Arias v. Gutman, Mintz, Baker & Sonnenfeldt, PC and 1700 Development Co., a FDCPA case on appeal to the U. S. Court of Appeals for the Second Circuit.  In its brief, the CFPB states that its interest in the case stems from its FDCPA enforcement authority and its special mandate to protect older Americans from unfair, deceptive or abusive practices.

The defendants in the case are a landlord and a debt collection law firm seeking to collect a default judgment against the plaintiff for unpaid rent obtained by the landlord.  The law firm issued a restraining notice to the plaintiff’s bank  which restrained a portion of the plaintiff’s funds on deposit after establishing that the remaining funds were automatically protected as deposits of Social Security benefits.  The plaintiff subsequently claimed an exemption for all of the funds in his account on the basis that  the only deposits to the account were monthly Social Security benefits.  The law firm objected to the exemption claim by commencing a special proceeding in state court supported by an affirmation.   In its supporting affirmation, the law firm claimed that (1) it was not possible to determine the amount of exempt funds because the plaintiff did not provide any records starting from a zero balance, and (2) the Social Security benefits would lose their exempt status if commingled with non-exempt funds and the plaintiff failed to provide documents showing there had been no commingling.  The law firm eventually stipulated to the release of the restrained funds.

The plaintiff thereafter filed an action in federal district court in which he alleged that the law firm’s objection was false, misleading, and deceptive in violation of the FDCPA and was also unfair and unconscionable in violation of the FDCPA.  The district court assumed the claims made by the law firm in the objection were false but determined they were not actionable because they were not material.

The court found that the misrepresentations would not have impeded the ability of the “least sophisticated consumer” to respond to or dispute collection because the objection sought a prompt hearing and, even though he appeared pro se, the plaintiff had received an exemption notice that included information about how to obtain free legal representation.  The court also determined that the least sophisticated consumer would realize that the law firm’s misstatement about commingling funds would not have been a sufficient ground to allow the law firm to garnish the funds.

In addition, the court concluded that the law firm could not have engaged in unfair or unconscionable conduct because it had objectively complied with New York process, whether or not it had acted in bad faith.  The court also found that the existence of a separate remedy under New York law made it  unnecessary to impose liability under the FDCPA.  Accordingly, the court granted judgment on the pleadings to the defendants.

In its brief, the CFPB argues that the district court erred in rejecting the consumer’s claims and asks the Second Circuit to vacate the judgment on the pleadings and remand the case to the district court.  According to the CFPB, under the objective least sophisticated consumer standard, the district court should have considered the effect of the law firm’s misstatement about commingling on a hypothetical consumer, rather than on a plaintiff who claimed never to have commingled his account.  It also asserts that the law firm’s misrepresentations were material because the information would have been important to the least sophisticated consumer in deciding how (and whether to) respond to the law firm’s objection.

The CFPB also calls the district court’s reliance on the law firm’s compliance with New York procedures “fundamentally misplaced,” arguing that the plaintiff’s allegation that the law firm filed a baseless pleading in the hopes of recovering exempt funds stated a FDCPA claim.  It also argues that the plaintiff’s claim “is no less viable because he could have also pursued relief under New York law.”

The CFPB has filed a supplemental amicus brief with the U.S. Court of Appeals for the Third Circuit in Bock v. Pressler & Pressler, LLP, the case in which the district court ruled that a debt collection law firm violated the FDCPA by filing a complaint without “meaningful attorney involvement.”  In its amicus brief, which was filed jointly with the FTC, the CFPB argued that the “meaningful attorney involvement” standard that has been applied to debt collection letters should apply equally to debt collection complaints.

The supplemental amicus brief was filed in response to a Third Circuit order requesting that the parties file supplemental briefs addressing the applicability of the U.S. Supreme Court’s decision in Spokeo, Inc. v. Robins, including the question whether the plaintiff had established concrete harm sufficient to establish Article III standing or whether he had only established a bare procedural violation.  In Spokeo, the Supreme Court ruled that a plaintiff alleging a violation of the Fair Credit Reporting Act must be able to establish “an injury in fact” to have standing under Article III of the U.S. Constitution to sue for statutory damages in federal court.  The Supreme Court indicated that, to satisfy the “injury in fact” requirement, a plaintiff must show that he or she suffered “an invasion of a legally protected interest” that is both “concrete” and “particularized.”  To be particularized, an injury must affect the plaintiff “in a personal and individual way.”  To be concrete, an injury must “actually exist”; it must be “real.”

The district court had ruled that the filing of a collection complaint without “meaningful attorney involvement” violates the FDCPA provision that prohibits a debt collector from using false, deceptive or misleading representations in connection with collecting a debt.  In its supplemental brief, the CFPB argues that the plaintiff’s injury is “particularized” because it was personal to him in that the defendant law firm “misrepresented to Bock that an attorney had been meaningfully involved in the lawsuit filed against him.” (emphasis provided)  Relying on the U.S. Supreme Court’s 1982 decision in Havens Realty Corp. v. Coleman (a case involving the FHA), the CFPB also argues that the plaintiff’s injury is “concrete” because “a person who has been subjected to a misrepresentation made unlawful by [the FDCPA] suffers a concrete injury that satisfies Article III.”  The CFPB asserts that under Havens Realty, the plaintiff has a “concrete” injury “even if he has not alleged that the misrepresentation cause additional consequential harm.”

With regard to whether the plaintiff had only established a bare procedural violation, the CFPB argues that the plaintiff’s “statutory right to be free from misleading debt-collection practices…is not a procedural right for which a separate ‘concrete harm’ must be identified.”  (emphasis provided)  According to the CFPB, an infringement of that statutory right, in itself, satisfies the Article III injury in fact requirement because it is a “specific injury.”



On March 29, 2016, the U.S. Supreme Court will hear oral argument in a Fair Debt Collection Practices Act case in which the CFPB joined the Solicitor General in filing an amicus brief in support of the plaintiffs.  The court granted the SG’s motion to participate in the oral argument.

The plaintiffs in Sheriff v. Gillie had received debt collection letters signed by individuals who purported to be special counsel hired by the Ohio Attorney General (OAG).  The letters included the OAG’s letterhead and state seal.  The plaintiffs sued the attorneys and their law firms, alleging that use of the OAG letterhead created a false impression that the letters were sent by the OAG in violation of the FDCPA provision that prohibits the false representation that a document was issued by a state official.  They also alleged that the letters violated the FDCPA provision that prohibits the use of a name other than the “true name” of the debt collector’s business or company. The OAG intervened in support of the defendants.

The district court granted summary judgment to the defendants, holding that Ohio’s special counsel are excluded from the FDCPA’s definition of “debt collector” as officers of the state.  It also concluded that even if special counsel were debt collectors, their use of the OAG letterhead did not violate the FDCPA because the letters accurately reflected their role as special counsel appointed by the OAG to collect debts owed to the state.

The Sixth Circuit reversed, holding that the special counsel did not qualify for the FDCPA’s state officer exemption which defines an “officer” to include “any person authorized by law to perform the duties of the office.”  The court found that the Ohio statutes authorizing the appointment of special counsel to collect debts owed the state did not authorize special counsel to fulfill the duties of any office and only established the framework under which the OAG within his discretion could delegate the collection of debts to a third party collector.  On the merits of the FDCPA claim, the court concluded that the letters would violate the FDCPA if they contained a representation that had the tendency to confuse the least sophisticated consumer but concluded that the letters, when read as a whole, may have clarified any confusion for the least sophisticated consumer resulting from the letterhead.  The Sixth Circuit remanded the case for the issue to be decided by a jury.

The plaintiffs’ certiorari petition presented two questions: whether (1) special counsel appointed by the OAG to collect debts owed the state are “officers” excluded from the FDCPA’s definition of “debt collector,” and (2) special counsel’s use of the OAG letterhead violated the FDCPA.  In their amicus brief, the SG and CFPB argue that the special counsel did not qualify for the FDCPA’s state officer exemption because they do not occupy any state “office” and do not exercise any portion of the state’s sovereignty.  Instead, their duties are defined by contracts that designate the special counsel to be independent contractors.  They also argue that whether the letters violated the FDCPA should be judged from the perspective of “the least sophisticated consumer” and, because a reasonable jury could conclude that the letters violated the FDCPA, the Sixth Circuit correctly reversed the district court’s grant of summary judgment for the defendants.

The Michigan Attorney General, joined by the AGs of 11 other states, filed an amicus brief in support of the defendants and Ohio AG.  It is unusual for state AGs to be on the opposite side from the CFPB and consumer advocacy groups.  While the Michigan and Ohio AGs are Republicans, two of the AGs who joined the amicus brief are Democrats.

The CFPB, jointly with the FTC, has filed an amicus brief with the U.S. Court of Appeals for the Third Circuit in Bock v. Pressler & Pressler, LLP, the case in which the district court ruled that a debt collection law firm violated the FDCPA by filing a complaint without “meaningful attorney involvement.”  In the brief, the CFPB and FTC argue that the “meaningful attorney involvement” standard that has been applied to debt collection letters should apply equally to debt collection complaints.

The CFPB’s support for the plaintiff’s position in Bock is not surprising since the CFPB has sought to invoke the “meaningful attorney involvement” standard in its enforcement proceedings against collection firms.  The Maryland Court of Special Appeals recently declined to adopt the standard for FDCPA claims based on alleged insufficient attorney involvement in debt collection litigation.

The CFPB has filed an amicus brief in Billings v. Propel Financial Services, LLC, a case on appeal to the U.S. Court of Appeals for the Fifth Circuit.  The issue in the case is whether a private lender extends“consumer credit” under TILA by providing loans to consumers for the purpose of paying residential property taxes.

The plaintiffs in the case had obtained a loan from a licensed property tax lender to pay property taxes on their home.  According to the CFPB’s brief, Texas law allows licensed property tax lenders to charge annual interest of up to 18% and specified fees on “property tax loans.”  Such loans are generally defined as an advance of money in connection with the payment of property taxes and related closing costs in which the taxing unit’s lien is transferred to the property tax lender.  The plaintiffs alleged that they entered into a Property Tax Payment Agreement (Payment Agreement) with the lender under which they financed the amount of their unpaid taxes, plus closing costs and loan origination and processing fees, at an interest rate of 13.5%.

In their class action complaint, the plaintiffs alleged various TILA violations by the lender.  The district court dismissed the complaint, holding that property taxes are not a debt under Texas law and allowing individuals to defer payment of tax obligations did not constitute an offer of credit.  The court also held that the plaintiffs’ property tax loan was not “consumer credit” subject to TILA because property tax obligations are for the public’s benefit.

In its brief in support of the plaintiffs, the CFPB argues that because the Payment Agreement provided for an advance of funds by the lender to pay the plaintiffs’ property taxes in exchange for which the lender received the plaintiffs’ promise to pay back the loan with interest, the arrangement constituted an extension of credit under TILA.  In support, the CFPB points to a comment in the Regulation Z Official Staff Commentary which provides that while tax obligations are not “credit” under TILA, third party financing of such obligations is credit.

It further argues that, in concluding that a property tax loan is not subject to TILA, the district court gave undue significance to the transfer of the tax lien to the lender.  According to the CFPB, the district court incorrectly concluded that the loan did not pay off the plaintiffs’ taxes and create a debt owed by the plaintiffs but instead only transferred the tax lien to a new party.  In addition, the CFPB argues that, in concluding that the loan was not “consumer credit,” the court incorrectly focused on the state’s purpose in imposing taxes for the public benefit, rather than the plaintiffs’ consumer purpose in obtaining the loan.

The Consumer Law & Policy Blog has reproduced a copy of a letter sent yesterday by the CFPB seeking suggested cases for the CFPB’s amicus brief program.  The letter indicates that the amicus program has so far filed 14 amicus briefs in the federal courts of appeals and has worked closely with the Solicitor General’s Office on several amicus briefs in the U.S. Supreme Court.

The letter, which is not posted on the CFPB’s website, apparently was sent to a list of recipients selected by the CFPB.  In the letter, the CFPB states that it seeks the case recommendations of such recipients “as important stakeholders in the area of consumer finance.”  One wonders to whom the CFPB sent this letter in which it appears to be trolling for more opportunities to submit amicus briefs.  I’m not aware of any industry people who received this letter.

The CFPB, together with the FTC, has filed an amicus brief in Hernandez v. Williams, Zinman & Parham, P.C., a Fair Debt Collection Practices Act case on appeal to the U.S. Court of Appeals for the Ninth Circuit. 

The case involves the FDCPA requirement in 15 U.S.C. §1692g(a) for “a debt collector” to send a validation notice either in “the initial communication” or “[w]ithin five days after the initial communication with a consumer in connection with the collection of any debt.”  The issue before the Ninth Circuit is whether the requirement only applies to the first debt collector that contacts a consumer to collect a particular debt or to each debt collector that contacts the consumer to collect that debt.

The plaintiff in the case claimed that the letter she received from the defendant containing the validation notice violated the FDCPA because the notice did not include all required information.  The defendant argued that it was not subject to the FDCPA validation notice requirement because its letter was not the “initial communication” the plaintiff received about the debt.  According to the defendant, because the debtor had previously received a validation notice complying with the FDCPA from another debt collector, the defendant was a subsequent debt collector that had no obligation to comply with the validation notice requirement. 

The district court granted summary judgment to the defendant, concluding that the validation notice requirement did not apply to the defendant’s letter because it was not the initial communication that the plaintiff had received about the debt.  According to the district court, the FDCPA’s plain text contemplated only one initial communication with a debtor on a given debt, meaning the initial communication from the initial debt collector. 

In its amicus brief in support of a reversal of the district court’s decision, the CFPB argues that each debt collector that contacts a consumer — not just the first debt collector that attempts to collect a particular debt — must send a validation notice that complies with the FDCPA.  According to the CFPB, §1692g(a) can naturally be read to apply to the initial communication of any debt collector, initial or subsequent, that contacts a consumer about a debt. 

The CFPB also argues that for §1692g(a) to serve its purpose, which was to eliminate the problem of debt collectors attempting to collect the wrong amounts from the wrong consumers, it must apply to both initial and subsequent debt collectors.  Finally, the CFPB asserts that to the extent there is any ambiguity in §1692g(a), the court should defer to the views of the CFPB and FTC (which shares concurrent enforcement authority with the CFPB).