Could there be an opportunity for companies facing enforcement actions from the Consumer Financial Protection Bureau to get better settlements or even refuse to cooperate with investigations as the regulator faces a Supreme Court battle to determine whether its leadership structure is constitutional or not? According to a group of attorneys quoted in a published report, those ideas should be included in the decision-making process, at least for now.
[EDITOR’S NOTE: Sign up here for a free webinar on Tuesday, Oct. 29 to discuss the impact of this case on the credit and collection industry. The webinar is sponsored by WebRecon.]
The Supreme Court has agreed to hear arguments in the case of Seila Law v. CFPB, which, for once and for all, determine whether the current leadership structure of the regulator is constitutional or not. Right now, the director of the CFPB can only be fired by the president for cause, and not for any reason. Some have said that this makes the director of the CFPB one of the most powerful individuals in Washington, D.C.
The key question for any company in the financial services industry, including those in the credit and collection industry, is what does this case have to do with us? What is the difference if the CFPB’s leadership structure is constitutional or not?
The answer is that if the agency’s leadership structure is unconstitutional, it may not have the authority to issue Civil Investigative Demand letters, which are essentially subpoenas to produce documents.
“My response to that would be, ‘I’m not responding to anything.’ We don’t know whether this agency is unconstitutional” and if they have the authority to issue a CID, said Joann Needleman, the head of Clark Hill’s consumer financial services regulatory & compliance practice group, in a published report.
On the other hand, the CFPB may be more interested in settling enforcement actions rather than take someone to court due to the uncertainty over the Seila Law case.
“The CFPB is likely going to try to settle things to avoid court. There could be a discount on a settlement given that they want to avoid court in the short run,” said Eric Goldberg, a former CFPB managing director for regulations who is now a partner at Akerman LLP, in the report
