The battle for control of the Consumer Financial Protection Bureau (“CFPB”) raged on this Thursday during oral argument before the United States Court of Appeals for the District of Columbia Circuit in English v. Trump. All three panel judges seemed skeptical of English’s claim that she should be acting director of the CFPB, but two judges questioned whether President Trump could appoint Mulvaney as acting director when a provision in the Dodd-Frank Act states that a subsection on budgeting and financial management “may not be construed as implying … any jurisdiction or oversight over the affairs or operations of the [CFPB]” by the Office of Management and Budget (“OMB”). Continue Reading D.C. Circuit Questions English’s Standing to Challenge CFPB Control
In response to “the void left by the Trump Administration’s pullback of the [CFPB],” the New Jersey Attorney General recently announced that Paul R. Rodriguez will be serve at the Director of the New Jersey Division of Consumer Affairs, the state’s lead consumer protection agency. Mr. Rodriguez will serve as the Acting Director of the Division beginning on June 1, 2018, until he is confirmed by the New Jersey Senate. This appointment fulfills one of Governor Phil Murphy’s promises to create a “state-level CFPB” in New Jersey.
Several other state attorneys general, including those in California, Connecticut, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Mexico, North Carolina, Oregon, Vermont, Virginia, and Washington, have announced that they intend to fill any void resulting from leadership changes at the CFPB by continuing to vigorously enforce federal consumer protection laws, as well as the consumer protection laws of their respective states. This sentiment was memorialized in a December 14, 2017, letter from the attorneys general to President Trump expressing their support for the CFPB’s mission and their disapproval of Mick Mulvaney’s appointment as CFPB Acting Director.
Seyfarth Shaw will continue to monitor and report on this potential state-level CFPB formation trend and related enforcement activity.
Seyfarth Synopsis: One court upholds protection of Dodd-Frank limiting the President’s removal authority, while another court stifles a challenge against Mulvaney serving as acting Director of CFPB.
Last week, the Trump Administration experienced mixed results in the ongoing litigation over the Consumer Financial Protection Bureau (“CFPB”). As we’ve mentioned in our prior publications, there are several actions pending that involve the President’s authority to control the CFPB. The first action discussed below, which had been languishing in the court for some time, raised the issue of whether the CFPB’s structure as an independent agency is constitutional. The Trump Administration lost on this issue for the moment. In the second action, the Trump Administration dodged, at least temporarily, a challenge to President Trump’s appointment of current CFPB Director Mick Mulvaney because the court determined that the plaintiff, a non-profit credit union, had no standing to bring its case. Continue Reading Win Some, Lose Some: Trump Gets a Loss and a Win in the Fight to Control the CFPB
On January 23, 2018, the Consumer Financial Protection Bureau’s (“CFPB”) Acting Director, Mick Mulvaney, issued a mission statement to the CFPB redirecting the agency’s mission and focus. Mulvaney emphasized that the law mandates the enforcement of consumer protection laws and that, although things would be different under new leadership, the CFPB will continue to fulfill its mandate.
Mulvaney made clear that he did not see the CFPB as the “good guys” out to fight the “bad guys,” but instead he noted that the agency would treat both consumers and financial services companies fairly and equally. To that end, the CFPB will focus its enforcement efforts on quantifiable and unavoidable harm to the consumer. Where no such harm exists, the agency will not go looking for excuses to bring lawsuits. Continue Reading Under New Leadership, CFPB No Longer Interested in Pushing the Envelope on Consumer Protection Laws
Seyfarth Synopsis: A federal judge on Wednesday denied a request to remove Mick Mulvaney as the CFPB’s acting director, finding that the President has authority to appoint the acting director despite former CFPB Director Cordray’s attempt to handpick his successor.
On January 10, 2018, Judge Timothy Kelly of the U.S. District Court for the District of Columbia and a Trump Administration appointee denied Consumer Financial Protection Division (“CFPB”) Deputy Director Leandra English’s request for preliminary injunctive relief that would displace current CFPB Acting Director Mick Mulvaney. Former CFPB Director Richard Cordray resigned effective at midnight on November 24, 2017, triggering a political showdown. That day, Cordray designated English as the CFPB’s Deputy Director and purported to name her as his successor. At the same time, the President announced that he had appointed Mulvaney, the Director of Management and Budget, as Cordray’s replacement.
On November 26, 2017, English filed a lawsuit against the President and Mulvaney, requesting declaratory and injunctive relief that would restrain the President from appointing an acting director other than her, direct the President to withdraw Mulvaney’s appointment, and prohibit Mulvaney from serving as acting director. After a hearing, the Court denied English’s request for emergency relief, finding that English had not shown a likelihood of success on the merits and had otherwise failed to meet the prerequisites for emergency relief.
On December 6, English filed an amended complaint and moved for a preliminary injunction seeking substantially the same relief. The Court held a hearing on the motion on December 22. In its decision, issued on Wednesday, the Court found that once again English was not likely to succeed on the merits of her claim nor was she likely to suffer irreparable harm absent the injunctive relief sought. The Court also noted that the “balance the equities and the public interest also weigh against granting the relief.”
In reaching its second decision, the Court relied largely on the Federal Vacancies Reform Act of 1998 (“FVRA”), which permits the President to appoint a temporary officer to a vacant position without Senate confirmation if the President and Senate cannot promptly agree on a replacement. The Court rejected English’s argument that the CFPB Director position was excluded from the FVRA and that Dodd-Frank instructs that the Deputy Director shall serve as acting Director in the absence of the Director. Instead, the Court found that reading the two statutes together, Dodd-Frank requires that the Deputy Director “shall” serve as acting Director, but that under the FVRA the President “may” override that default rule.
On January 12, English filed her notice of appeal in the U.S. Court of Appeals for the D.C. Circuit, challenging the district court’s decision. In her notice, she requested expedited review of the appeal because a new director could be nominated and confirmed before she can become the acting director.
Meanwhile, the Lower East Side People’s Federal Credit Union, an entity regulated by the CFPB, filed a similar lawsuit in the U.S. District Court for Manhattan. The credit union has filed a motion for a preliminary injunction removing Mulvaney as acting director and instating English as the acting director. The Trump Administration opposes that motion and has filed a competing motion to dismiss the credit union’s complaint for lack of subject matter jurisdiction. The court held a hearing Friday on the dueling motions, and we expect the court to rule on the motions promptly, perhaps as early as this week.
Seyfarth Shaw continues to monitor the developments in “the battle of the directors” and will keep its readers apprised of updates.
Seyfarth Synopsis: A somewhat bizarre event – even by this year’s standard of unusual current events – hit the news stream earlier this week, as two “Acting Directors” showed up to work on Monday morning at the U.S. Government’s Consumer Financial Protection Bureau, also known as the CFPB. In today’s vlog, Partner Jerry Maatman of Seyfarth Shaw, LLP gives our readers an explanation of the situation at the CFPB, discusses the agency’s significance for employers, and forecasts potential class action implications based on these developments.
The Consumer Financial Protection Bureau (“CFPB”) has been a controversial government agency since its authorization under the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2011. Formed out of a post-2008 recession by then-Harvard Law Professor and current U.S. Senator Elizabeth Warren, the CFPB is designed – per its legislative history – to “protect consumers from unfair, deceptive, or abusive practices and take action against companies that break the law.” As of January 2017, this consumer-friendly agency had secured nearly $12 billion to 29 million consumers.
On Monday, November 27th, both Leandra English and Mick Mulvaney sent out emails to CFPB staff members claiming to be the Acting Director of the agency. This conflict stemmed from Richard Cordray, longtime Director of the CFPB, relinquishing his duties effective November 24 at midnight. Upon his departure, Cordray named English as the Deputy Director, on the assumption that she would assume leadership as Acting Director (and Cordray would block the White House from interfering). However, at the same time, President Trump used his federal appointment power under the Federal Vacancies Reform Act (FVRA) to name Mick Mulvaney as Acting Director. English subsequently filed a lawsuit seeking an injunction against President Trump and Acting Director Mulvaney in the U.S. District Court for the District of Columbia, but Judge Timothy Kelly ruled in favor of Trump and Mulvaney.
This week’s leadership debacle was not the only time the CFPB has been in the news recently. Last month, the U.S. Senate voted to repeal the CFPB’s Arbitration Rule by a narrow 51-50 vote. The existence of this broad rule effectively barred financial institutions from including a class action ban in their arbitration agreements with consumers. Similar to the agency itself, the Arbitration Rule was a strictly partisan issue. The Republican Party claimed that the rule allowed trial lawyers to “line their pockets” off unnecessary customer class actions and hurt American business. On the other side, Democrats argued that the repeal of this rule and ensuing limitations to the CFPB placed too much power in the hands of big business and hurt consumers.
As the vlog outlines, potential class action implications of this controversial agency are yet to be seen. Assuming that Acting Director Mulvaney remains in control at the CFPB, it is safe to say the agency he once called a joke “in a sick, sad way” is headed for a limitation in institutional reach and power. More importantly, though, the upcoming U.S. Supreme Court decisions regarding class action waivers in NLRB v. Murphy Oil USA, Inc. (No. 16-307), Epic Systems Corp. v. Lewis (No. 16-285), and Ernst & Young LLP v. Morris (No. 16-300) will have a profound impact on future class action litigation. One takeaway from this situation that cannot be debated, though, is Jerry’s final thought of the vlog. “We are living in interesting times these days.”
Today the Senate struck down a new Consumer Financial Protection Bureau (“CFPB”) rule which would have prohibited providers of financial products and services from including class action waivers in their arbitration agreements with consumers. The action is a win for the financial services industry.
Way back in March 2015 we blogged about the CFPB’s study of pre-dispute arbitration contracts in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The CFPB’s study culminated in a Report to Congress which found that arbitration clauses were ubiquitous in consumer financial products and services agreements, that consumers were not aware and did not understand them and that such clauses were generally detrimental to consumers. Specifically, the CFPB found that the availability of class actions served to deter companies from engaging in potentially illegal activities, consumers tended to get more relief more often in class actions rather than in individual arbitration proceedings, and there was no evidence that arbitration and class action waiver provisions lowered costs for consumers.
In May 2016, the CFPB proposed a rule that would (1) “prohibit covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action;” and (2) require such providers to submit arbitral records to the CFPB. See Arbitration Agreements, 81 Fed. Reg. 100, 32830 (May 24, 2016) (to be codified at 12 C.F.R pt. 1040). The proposed rule would have covered financial products or services offered or provided for use by consumers primarily for personal, family or household purposes, or they are delivered, offered, or provided in connection with such products or services, such as debt collection. 81 Fed. Reg. 100, 32927.
In July 2017, the House of Representatives voted 231-190 on a resolution to prevent the CFPB rule from taking effect. On October 24, 2017, the resolution came before the Senate for a vote and passed 51-50. Vice President Pence cast the tie breaking vote. The resolution now goes to President Trump for signature and, based on comments by the White House, he is expected to sign.
The death of the CFPB’s rule returns providers of financial services and products to the status quo. Providers are free to continue to include and enforce arbitration agreements and class action waivers in agreements with consumers. For more information, please reach out to a Seyfarth attorney or see our One Minute Memo.
On Tuesday, May 26, 2015 at 12:00 p.m. Central, Jason P. Stiehl, Giovanna A. Ferrari and Jordan P. Vick will present the first installment of the 2015 Class Action Webinar series. They will provide a summary of key decisions from 2014, identify key trends for companies to watch for in 2015, as well as practical “best practices” and risk management for the future.
In 2014, companies saw a major change in the focus and risk of class action litigation. According to one industry survey, the percentage of class actions qualifying as “high risk” or “bet-the-company” tripled from 4.5 percent to 16.4 percent. This no doubt derives from the increase in volume of large settlements and continued increase in volume of suits under statutes with minimum statutory penalties, such as the Telephone Consumer Protection Act (TCPA).
The webinar will be provide insight on:
- The landscape for in-house counsel, including identifying the legal market spend and risk for class actions
- Case law and trends from 2014, including:
- evolving class certification standards post-Comcast
- increased scrutiny of class settlements
- continued TCPA filings and large settlements
- post-Concepcion waiver decisions and the CFPB’s arbitration study
- standing and privacy/data breach cases
- Highlights from 2015, including:
- increase use of motion to strike class allegations
- CAFA challenges
- TCPA decisions
- DirecTV Supreme Court arbitration case
- International expansion of class action vehicle in Europe
- Practical considerations and takeaways
Registration: there is no cost to attend this program, however, registration is required.
*CLE Credit for this webinar has been awarded in the following states: CA, IL, NJ and NY. CLE Credit is pending for GA, TX and VA. Please note that in order to receive full credit for attending this webinar, the registrant must be present for the entire session.
If you have any questions, please contact firstname.lastname@example.org.
One of the largest issues to loom over the class action battlefield in the past decade has been the use of arbitration clauses in consumer contractual relationships. As many know, and as discussed in our sister blog, Workplace Class Action Blog, the United States Supreme Court’s seminal 2011 decision in AT&T Mobility v. Concepcion became a guiding light for many businesses on how, and when, to utilize arbitration provisions in their agreements. More recently, as discussed in a previous post, in 2013, the Court provided further guidance regarding waiver of class arbitration in American Express Co. v. Italian Colors Restaurant. The debate since has raged between consumer advocacy groups and businesses that requiring consumers to arbitrate favors businesses and artificially limits recovery for consumers. Silent in that debate, however, has been any empirical data to support the claim– until know. On March 10, 2015, the CFPB released the final results of its consumer arbitration study. Not surprisingly, the report is heavily critical of the arbitration process and supportive of allowing consumers to pursue claims in federal court using the Rule 23 class vehicle.
Section 1028 of the Dodd-Frank Act authorizes the Consumer Financial Protection Bureau (“CFPB”) to regulate or even eliminate arbitration provisions from consumer financial products and services agreements, if it determines such action is “in the public interest and for the protection of consumers.” To that end, starting in 2012, the CFPB set about compiling data to support this goal. The 728-page report analyzed nearly 850 consumer finance agreements, 1,800 consumer arbitration disputes, 3,400 individual federal court lawsuits, 42,000 credit card cases filed in small claims court and 420 class action settlements filed in federal courts. The results, again heavily sloped in favor of meeting the initial objective, include the following findings:
- Tens of millions of consumers are covered by mandatory arbitration agreements
- Arbitration clauses were present in 53 percent of credit cards studied, 92 percent of prepaid cards and 86 percent of private student loan lenders
- Approximately 600 arbitration were filed per year between 2010 and 2012 in six different consumer finance markets
- There is no evidence that arbitration clauses lead to lower prices for consumers
- Over 90 percent of the arbitration agreements studied contained class action waivers
- Class action settlement provide substantially more relief to consumers than arbitration awards
- Over 75% of consumers surveyed said they were not aware of arbitration clauses in their agreements
- Less than 7% of consumers surveyed knew that arbitration clauses prevent them from suing
In his “Chapters from My Autobiography,” Mark Twain wrote “Figures often beguile me, particularly when I have the arranging of them myself; in which case the remark attributed to Disraeli would often apply with justice and force: ‘There are three kinds of lies: lies, damned lies, and statistics.'”
While the CFPB’s omnibus study appears to be an extensive work, compiling years of data and thousands of data points, it must be remembered that the genesis of this study was to support the CFPB’s charge of regulating or even eliminating arbitration provisions from consumer financial products and service agreements. Nonetheless, with this data, it seems inevitable that the next word we can expect to hear from the CFPB will be rulemaking efforts to effectuate this goal. While it is unclear whether the CFPB intends to severely limit the use of arbitration provisions in consumer financial agreements or propose an outright ban of such provisions, it is certain that the landscape for consumer arbitration agreements and class action waivers will change significantly in the near future.
As always, we will continue to keep you abreast of these events as they unfold.