A District Court judge in New York has denied a request from a group of defendants being sued by the Consumer Financial Protection Bureau to stay its lawsuit pending the outcome of the Supreme Court’s ruling on the CFPB’s funding structure, saying the duration of the stay would not be long enough and that memories will begin to fade if discovery does not start right away.
The Background: The CFPB filed its lawsuit back in 2022, accusing the company of violating the Consumer Financial Protection Act and the Fair Debt Collection Practices Act by allowing third parties to deceive consumers and selling debts to collection companies that were engaged in unlawful activities.
- Last August, the judge denied a motion to dismiss that was filed by the defendants, ruling the CFPB had standing to pursue its claims and that the defendants could be held vicariously liable for violations made by third-party collectors.
- A week later, on September 1, the defendants filed their motion to stay the proceedings until the Supreme Court issues its ruling in Community Financial Services Association v. CFPB, which is challenging whether the funding structure of the CFPB is constitutional.
The Ruling: Courts across the country have been split on whether to stay proceedings involving the CFPB until the Supreme Court issues its ruling, which is expected at some point this Spring. The CFPB suggested denying the stay outright or, as a compromise, allowing a limited amount of discovery to occur. The plaintiffs sought an outright stay of the proceedings.
- Noting that the interests of the defendants in avoiding unnecessary litigation costs was a checkmark in favor of staying the proceedings, the other considerations it needed to account for — the impact on the plaintiffs, the impact on the court, the impact on third parties, and whether a stay was warranted — were lined up against granting the request to stay the proceedings, ruled Judge Lawrence J. Vilardo of the District Court for the Western District of New York.
