Companies Push to Piggyback on Ruling Against CFPB

Dmitry Fomichev, David Gasparyan and D and D Marketing Inc. (doing business as T3Leads)

In April, the CFPB accused Dmitry Fomichev and David Gasparyan, co-founders of the lead aggregator T3Leads, of buying and selling loan applications containing sensitive personal information without vetting the buyers and sellers. Both pushed to dismiss the CFPB’s complaint. Fomichev’s defense lawyer, Morgan, Lewis & Bockius partner Nathan Hochman, argued the CFPB’s “unprecedented structure and function” create an unconstitutional separation of powers violation that voids any action taken by the agency.

A week after the D.C. Circuit panel struck down the CFPB’s structure, the agency argued the decision was “wrong and, even if it stands, would have no binding effect in this court.” But Gasparyan’s defense team said the decision would affect past challenges of the agency’s authority, noting that the D.C. Circuit opinion “found the positions of the CFPB without merit, disturbing and unconstitutional.”

In a Los Angeles federal court, Judge Philip S. Gutierrez denied their motions to dismiss the CFPB’s allegations but said he agreed with the D.C. Circuit panel’s ruling. The CFPB, he said, “has provided much fodder for constitutional objection in the years since its creation.”

“Although the court finds that the combination of the power accorded to the CFPB director and the limitations on the president’s removal powers violate Article II of the Constitution, these constitutional concerns do not prevent the CFPB from prosecuting this case and do not warrant dismissal of the Complaints,” Gutierrez said.

Accrediting Council for Independent Colleges and Schools

For more than a year, the Accrediting Council for Independent Colleges and Schools has resisted an investigation by the CFPB, arguing that the U.S. Department of Education serves as its sole regulator. A Washington federal judge sided with the accrediting council, ruling the CFPB lacked the authority to investigate the accreditation process.

The CFPB appealed the decision to the D.C. Circuit. In a brief filed Nov. 30, the accrediting council, noting the PHH decision, said the CFPB’s “request for unfettered power to investigate ACICS should be viewed with skepticism.”

The CFPB shot back in December, saying the accrediting council “provides no explanation as to how the constitutionality of the [Consumer Financial Protection Act’s] for-cause removal provision has anything to do with whether the bureau has statutory authority to investigate ‘practices in connection with accrediting for-profit colleges.’”

Regulators recently revoked the council’s federal recognition, citing lax oversight of some of the nation’s most controversial for-profit colleges.