A Law Firm 'Cleverly' Used Ellipses to Fight a CFPB Investigation. But It Still Lost.
The Consumer Financial Protection Bureau has prevailed in its latest standoff with a law firm, as a federal judge ordered the California-based Seila Law to respond to the agency's demand for records related to debt relief services. A judge wasn't impressed with what she called a law firm's "cleverly" use of ellipses in the attack against the subpoena.
August 28, 2017 at 03:26 PM
4 minute read
The Consumer Financial Protection Bureau has prevailed in its latest standoff with a law firm, as a federal judge ordered the California-based Seila Law to respond to the agency's demand for records related to debt relief services.
Seila Law had protested the CFPB's administrative subpoena—known as a civil investigative demand—as “nothing more than an unwarranted and impermissible fishing expedition,” arguing that the agency's investigation was overly broad and sought privileged information. The firm also joined the ranks of companies challenging the CFPB's independent, single-director structure as unconstitutional.
But, noting a past ruling in which she upheld the agency's controversial design, U.S. District Judge Josephine Staton of the Central District of California said she was unmoved by Seila Law's constitutional claims. Staton, who was appointed in 2010 to the U.S. District Court for the Central District of California, had previously endorsed the CFPB's structure in ordering the pension advance provider Future Income Payments to comply with the agency's document demands.
“Like the respondent in Future Income Payments, Seila Law relies heavily on the arguments advanced in PHH Corp. v. CFPB, a vacated 2-1 decision from the D.C. Circuit that this court continues to find unpersuasive,” Staton wrote Aug. 25.
An en banc panel of the D.C. Circuit heard arguments in the PHH case in May and is expected to hand down a ruling later this year.
Staton similarly rejected Seila Law's argument that the CFPB failed to adequately state the purpose and contours of its investigation.
In the law firm's brief opposing the CFPB's investigation, Staton wrote, “Seila Law cleverly uses ellipses to suggest that the [civil investigative demand's] notification of purpose provides no clue about the nature of the CFPB's investigation other than that the agency seeks 'to determine whether … unnamed persons are engaging in unlawful ats or practices in the advertising, marketing or sale of debt relief services or products … in violation of … any other federal consumer financial law.'”
“But what Seila Law omits through ellipses provides the fair notice that it supposedly seeks,” Staton wrote. She noted that the civil investigative demand specifies “debt relief providers” and “lead generators” among the types of businesses under investigation and identifies particular statutes and regulations that may have been violated.
Seila Law's lawyers at Bienert, Miller & Katzman did not immediately respond to a request for comment Monday.
Staton did find one area of the CFPB's demand as overly vague. The CFPB requested information about “other services” offered by the firm, but Seila Law said that language could be interpreted to encompass its work in areas unrelated to the subpoena, including immigration, personal injury and criminal defense.
“The court agrees,” Staton wrote. She restricted the definition of “other services” to areas outlined in the subpoena “that would not be barred by the CFPB's practice of law exclusion.”
Law firms have proven to be a regular target of the CFPB, drawing lawsuits over their role in a variety of financial services, including debt collection and real estate closings.
In January, two medical debt collection law firms and their president agreed to provide more than $500,000 in refunds and pay a nearly $80,000 penalty to resolve allegations that they falsely indicated that debt collections calls and letters were from attorneys. Announcing the settlement, CFPB Director Richard Cordray said, “Misrepresenting that a lawyer is involved in a debt collection action gives the collection a false weight.”
In Cleveland federal court, an Ohio law firm is fighting similar allegations brought by the CFPB.
The CFPB's record against law firm defendants has not been perfect. Last month, a Kentucky real estate law firm successfully defended itself against allegations that its attorneys orchestrated an illegal kickback scheme.
Related Articles:
|- Law Firm, Fighting CFPB Subpoena, Urges Court to End 'Fishing Expedition'
- The CFPB Is Losing a Trial Court Ally in the US Justice Department
- How to Win CFPB Favor? Self-Report Misconduct, Like American Express Did
- Nothing 'Inappropriate' to See Here. CFPB Defends Going to State Regulators As Court Stalls Subpoena
- Kentucky Law Firm Beats CFPB's Kickback Claims
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