While the future of how the Consumer Financial Protection Bureau will look and feel is being determined in court, the current leadership of the Bureau continues to make news. Here is a roundup of what the Bureau has been up to, including backing away from enforcement actions, and proposed settlements, and a preview of what is sure to be an interesting court hearing that start tomorrow.
Bureau Dismisses Proposed Settlement in Debt Collection Case
On Friday, the Bureau filed a voluntary dismissal, with prejudice, in a case against the National Collegiate Student Loan Trusts, which began all the way back in 2017. The two sides had reached a proposed $2.25 million settlement in the case in the days before President Trump took office in January, but that settlement was being held up by a number of parties who objected to the agreement. While that was still being worked out before Judge Stephanos Bibas of the District Court for the District of Delaware, the CFPB opted to drop the case.
The CFPB accused the NCSLTs, a group of 15 Delaware statutory trusts holding securitized private student loans, of engaging in improper debt collection practices. These practices were facilitated by subservicers acting on behalf of the Trusts.
CFPB Withdraws from Case Against Auto Lender
The Bureau last week announced it was withdrawing from a lawsuit it filed with the Attorney General of New York against Credit Acceptance Corp., a subprime auto lender. If the New York AG continues the case, the case would likely only apply to New York residents only going forward.
The CFPB and New York AG filed their lawsuit back in January 2024, accusing it of tricking consumers into high-cost loans on used cars that resulted in unaffordable monthly payments, vehicles being repossessed, and customers facing debt collection lawsuits.
“We are pleased with the CFPB’s decision to withdraw from this case, which we believe never should have been brought in the first place,” stated Erin Kerber, Credit Acceptance’s Chief Legal Officer, in a statement. “We are proud to have provided over five million people with the opportunity to own a vehicle through our network of dealers. We look forward to millions more consumers having such an opportunity and remain committed to operating with integrity and in compliance with all applicable laws.”
Credit Acceptance has filed a motion to dismiss, which is pending.
Ninth Circuit Denies En Banc Request in CashCall Case
The Court of Appeals for the Ninth Circuit has denied a request from CashCall for an en banc rehearing in a case filed by the CFPB in which it was ordered that the company pay more then $134 million in restitution. The Appeals Court affirmed the ruling back in January, after which CashCall sought a rehearing before the entire Ninth Circuit.
The CFPB initiated this action back in 2015 and it has been in litigation ever since, including two separate trips before the Ninth Circuit. CashCall, a California-based lender, was accused of devising a scheme to avoid state usury laws as it expanded operations beyond California. It allegedly partnered with a lender incorporated under the laws of the Cheyenne River Sioux Tribe. Loans were issued under terms stating they would be governed by tribal law, which CashCall argued shielded them from state-imposed interest rate caps. CashCall then purchased the loans and sought to collect payments from consumers.
The CFPB filed a complaint in 2015, alleging that the loans were invalid under state laws, making CashCall’s collection efforts illegal. The Bureau claimed the company violated the Consumer Financial Protection Act’s prohibition against unfair, deceptive, or abusive acts and practices (UDAAP) by attempting to collect payments on these unenforceable debts.
Behind the Scenes of Move to Fire CFPB Staffers
The New York Times has published a behind the scenes look at how the leadership of the CFPB tried to fire 1,500 employees, using emails and accounts filed in advance of a hearing tomorrow about whether the firings were legal or not.
After an Appeals Court ruling cracked open an opportunity for CFPB leadership to fire employees, those individuals, working with the Department of Government Efficiency, moved quickly to cull most of the Bureau’s employees. The move was lated blocked by Judge Amy Berman Jackson, who had ruled that firings or any reduction in force needed to comply with the order that a careful assessment needed to be conducted to determine whether any employee was needed to carry out the Bureau’s statutory responsibilities.
Up until the firings were announced, there were debates about how many employees needed to be kept, with some arguing that 500 were needed, instead of the 200 that would have been left if the reduction in force went forward as planned.
The article highlights many of the issues and mistakes that were made as the Bureau scrambled to shoot first and ask questions later. The one individual that would have been left in the Office of Servicemember Affairs, a legally required unit that aids military workers, had already accepted the government’s deferred resignation offer and would be retiring in September, The Times reported. He had turned in his work equipment and lost access to agency systems, workers said — meaning the office would be unstaffed if the firings proceeded.
