A District Court judge in Maryland has denied a debt collector’s motion to dismiss a lawsuit filed against it by the Consumer Financial Protection Bureau, ruling that even though the Supreme Court found the leadership structure of the Bureau to be unconstitutional, it did not dictate that it lacked authority to bring an enforcement action while under such a structure.
A copy of the ruling in the case of Bureau of Consumer Financial Protection v. Fair Collections & Outsourcing can be accessed by clicking here.
The CFPB filed its lawsuit against the collector last year, alleging it violated the Fair Credit Reporting Act and Fair Debt Collection Practices Act, for failing to ensure the accuracy of information submitted to credit reporting agencies, failing to reasonably investigate disputes, and collecting debt without a reasonable basis to assert it was owed.
The defendant filed a motion to dismiss, or, in the alternative, a motion to stay proceedings pending the outcome of the Supreme Court hearing in Collins v. Mnuchin, which, like the case in Seila Law v. CFPB, seeks to determine the constitutionality of of a federal agency being run by a single director who can only be fired for cause.
Even though the Supreme Court ruled in Seila Law that the leadership structure of the CFPB was unconstitutional, that is not enough to have the Bureau’s lawsuit against the collector dismissed, ruled Judge George Hazel of the District Court for the District of Maryland.
“Because the Supreme Court did not find dismissal necessary to
remedy the same constitutional defect at issue here or to incentivize further constitutional challenges, and found that ratification at least warranted consideration, this Court will follow suit, and will therefore proceed to determine whether dismissal is warranted on other grounds,” he wrote in his ruling.
The defendant argued that the CFPB lacked standing to bring its suit because of the constitutional defect that was in place at the time the suit was filed, that a subsequent ratification by CFPB Director Kathleen Kraninger was not enough to cure the defect, and that the funding structure of the Bureau violates the Appropriations Clause of the constitution.
But Judge Hazel rejected each of the arguments.
“The holding in Seila Law did not affect the CFPB’s authority—only that of its Director,” he wrote. “Indeed, the Supreme Court stated, if ‘the offending removal provision means the entire agency is unconstitutional and powerless to act, then a remand would be pointless.’ ”
