If you have not encountered the Consumer Protection Bureau odds are you will as the CFPB has authority over virtually every type of consumer financial transaction. With a lengthy confirmation and constitutional battle over the recess appointment of its Director now behind it, the CFPB has ramped up an already active regulatory and enforcement agenda. While the CFPB initially reached several high profile settlements with several credit card issuers, more recently the CFPB has filed contested complaints rather than consent orders. Some companies who find themselves crosswise with the CFPB may continue to be able to reach a settlement with the agency. However, the CFPB, like the FTC, has been quite aggressive in seeking monetary relief as well as broad injunctive and oversight provisions. As a result, some companies may find themselves unwilling or unable to settle with the agency without significantly impairing or crippling their ability to carry on. For those companies litigation may be the only logical alternative. Each company’s situation and strategy is unique, but if you find yourself in a situation where litigation seems almost inevitable, here are some highlights from a top ten list of things to consider (for the full list and published article click here).
1. Limit your response to the NORA letter.
When CFPB decides that an enforcement proceeding is likely, it often issues a Notice and Opportunity to Respond and Advise (“NORA”) letter. This letter sets forth in general terms whether the bureau believes you have violated any laws, and invites a response within 14 days. This may be your only opportunity to explain in detail the reasons why the CFPB should close its investigation and it’s tempting and sometimes even prudent to do so. However, if litigation is inevitable, consider a more concise document, or skip the response altogether. At this point, your response can do little but educate the CFPB — soon to be your opponent in a federal lawsuit.
2. Challenge CFPB’s UDAAP authority as applied to your case
CFPB has the authority to prevent “abusive” acts or practices. “Abusive” is, according to CFPB Director Cordray, “a little bit of a puzzle because it is a new term” and its meaning will have to be developed on a case-by-case basis. Depending on the facts of your case, consider making an argument that the broad concept of “abusive” did not provide you with sufficient advance notice that there would be a problem with the conduct CFPB challenges.
3. Don’t rely on other federal agencies.
Think you’ve got a clean bill of health from the FTC or another federal agency? Think again. The CFPB has overlapping authority in a great number of substantive areas. Dodd-Frank requires courts to grant the same deference to CFPB’s interpretation of federal consumer financial laws that they would “if [CFPB] were the only agency authorized to apply, enforce, interpret, or administer the provisions of such Federal consumer financial law.” 12 U.S.C. § 5512(b)(4)(B). Although CFPB will try to be consistent, if CFPB diverges from, for example, an FTC interpretation, courts must side with CFPB. Likewise, do not expect new lawyers at the U.S. Department of Justice to handle any federal court lawsuit and potentially offer a new — perhaps more moderate — view of the matter. The CFPB has its own so-called “independent litigation authority,” thus, the same lawyers who conducted the investigation will prosecute the follow-on lawsuit.
4. Energetically pursue affirmative discovery.
Don’t let discovery be one-sided. Try to even the playing field a bit and create settlement leverage with an affirmative discovery strategy. Propound contention interrogatories to discover the factual basis for CFPB’s allegations. Propound document requests, including all documents the CFPB has received from, or sent to, third parties related to you, including consumer feedback (positive or negative). Notice a Rule 30(b)(6) deposition of a CFPB representative. Courts increasingly have acknowledged that federal agencies are subject to the very same discovery devices as is any party in a federal court lawsuit, and prior agency strategies of asserting blanket objections and “deliberative process” privileges to resist such discovery are being overruled or limited.
5. Attack the CFPB’s advertising claims with the First Amendment and consumer surveys.
The CFPB bears the burden of demonstrating that your promotional materials are “false or misleading.” Argue that CFPB should be be required to produce evidence, for example, an expert who has conducted a survey, proving that actual consumers are misled by the advertising. While attacking the sufficiency of this evidence, be prepared to present counterevidence to demonstrate that the advertising claims are truthful and that consumers do not take away any false messages.
6. Fight for your right to trial by jury.
If you think that a jury may be more sympathetic to your case then a judge consider requesting one if the CFPB is seeking monetary relief. Whether and when a request for monetary relief triggers a right to a jury has been a battleground in cases brought by other agencies, and the law remains a bit unclear, but it is worth the effort if you think a jury may look more kindly upon your situation.
Litigation against the CFPB is to be avoided when possible. But when a CFPB-initiated federal court lawsuit is inevitable, being armed with offensive litigation strategies — in the very early stages — can be essential to a fair resolution.