United States: Despite 1st Administrative Appeal, CFPB Seeks Out Courts

On June 4, 2015, Consumer Financial Protection Bureau Director Richard Cordray issued a decision in the first appeal of a CFPB administrative proceeding. The appeal to Director Cordray followed the CFPB's first administrative trial before an administrative law judge. The defendant, a mortgage lender, has vowed to appeal it further to the circuit court.1 But despite the recent spotlight this matter has put on the CFPB's administrative process, the bureau has recently been filing more of its cases in federal court than ever before. This has important implications for the institutions under the CFPB's jurisdiction, and it may limit the impact of Director Cordray's decision on the statute of limitations in the recent appeal.

Settlement Is Typically Preferred By Both the Government and Company Under Investigation As with most government agencies, the vast majority of CFPB investigations end in either settlement (through a consent order) or closure. They rarely lead to active litigation because it is cheaper and faster for both the CFPB and the subject of the investigation to agree to a consent order.2 Moreover, litigation generally draws far more attention than consent orders, and companies typically want to minimize the amount of media attention when they are the subject of CFPB investigations.

Since the CFPB's enforcement authority took effect in July 2011, the bureau has had the authority to enforce federal consumer financial laws in its own administrative proceeding or in federal district court. The potential remedies in the two fora are the same, save for important differences in the statutes of limitations, which are discussed below.

In the past, when the CFPB has negotiated consent orders and has been the only plaintiff, it has typically filed the orders through its administrative proceeding. This process is faster because it only requires the approval of Director Cordray to enter the consent order, not the approval of a federal judge. It is also logistically simpler: the CFPB's attorneys do not need to research local court rules before filing the proposed consent.

In Situations Where It Used to Prefer an Administrative Proceeding, the CFPB Is Filing in Federal Court The CFPB's complaint3 and proposed consent order against PayPal Inc. in the U.S. District Court for the District of Maryland was one of three recent proposed consent orders that the bureau chose to file in federal court instead of through administrative proceeding without any clear explanation. The others were in the District of New Jersey and the Northern District of California. Since April 28, the CFPB has filed only two administrative consent orders, and both were smaller in dollar terms than typical bureau enforcement actions:  one did not require monetary relief and the other required an out-of-business mortgage company to pay a $228,000 civil money penalty.

In the Past, the CFPB's Federal Court Cases Fell Into Three Categories Before May, the CFPB's federal court cases mostly fell into three buckets: (1) cases where another enforcement agency was joining the case (see, e.g., the complaint and proposed consent orders with the Maryland attorney general, or the complaint and proposed order with the Navajo Nation); (2) cases where the CFPB could not reach a settlement with the defendant4 (e.g., the complaint against ITT Educational Services Inc.); and (3) cases where the CFPB sought to immediately shut down an alleged scam (e.g., the complaint and continuing litigation against alleged collectors of "phantom debt"). Just because a case falls into one of these buckets does not mean the CFPB must file in federal court, but prior to May most of the CFPB's federal cases fell into one of them.

The three recent federal consent orders do not fall into any of these three categories, and it is not clear why the CFPB chose to file them in court instead of an administrative proceeding. Perhaps the staff members who handle administrative filings were too busy working on Director Cordray's decision in the recent appeal. It is also possible that somebody in Congress complained about the CFPB's preference for administrative proceedings.

Regardless of the reason behind the recent trend, filing in federal court has the potential to create additional hurdles for the CFPB. Most importantly, the court must approve the proposed settlement. Thus far, most courts have deferred to the CFPB's judgment on what is a fair settlement. But recently U.S. District Judge William H. Pauley III in the Southern District of New York said he would not approve one of the CFPB's proposed consent orders until the parties "submit a motion explaining why this proposed settlement is fair, reasonable, and does not disserve the public interest." This additional briefing will require significant resources from the CFPB's enforcement office, particularly as it is the first such motion for the bureau. Director Cordray will probably want to review the papers himself. More importantly, it could delay implementation of the settlement and prevent consumers from receiving restitution. Judge Pauley's request, which is not unreasonable, could nudge the CFPB to pursue future consent orders administratively in order to save CFPB resources.

Lack of a Statute of Limitations May Make Administrative Proceedings More Attractive to the CFPB When It Anticipates Contested Litigation Instead of a Consent Order Interestingly, even as the CFPB has recently preferred federal court for its consent orders, an important development in the appeal decision may lead the bureau to file more matters that do not reach settlement administratively. In his June 4 decision, Director Cordray adopted the administrative law judge's decision that the Real Estate Settlement Procedures Act statute of limitations does not apply to CFPB administrative proceedings (but does apply to CFPB actions in federal court). He reasoned that RESPA's three-year statute of limitations only limits "actions," and that an administrative proceeding is not an "action," relying on BP America Production Co. v. Burton, 549 U.S. 84 (2006).

If Director Cordray's decision that the RESPA statute of limitations does not apply to administrative proceedings is upheld by on appeal, it could impact the CFPB's enforcement of other federal consumer financial laws as well. The CFPB will likely make the same argument that other statutes of limitations that refer to "actions" do not apply in administrative proceedings. Other limitations on "actions" appear in the Truth in Lending Act,5 Fair Credit Reporting Act and the Consumer Financial Protection Act (which contains the CFPB's prohibition on unfair, deceptive, or abusive acts or practices). If the CFPB successfully argues that the statutes of limitations do not apply to its administrative proceedings, it would increase the bureau's ability to reach back in time, which might create a strong incentive for the bureau to file contested litigation in an administrative proceeding.

However, that incentive is somewhat counterbalanced by the rules of the administrative proceeding, which create a "rocket docket," requiring the CFPB to have most of its evidence ready before it files the notice of charges. When it needs to gather evidence post-filing through discovery, the CFPB may continue to prefer federal court, as it did in the Morgan Drexen and ITT matters.


1. Under the CFPB's rules, a party to a cease-and-desist proceeding may obtain a review "by filing in the court of appeals of the United States for the circuit in which the principal office of the covered person is located, or in the United States Court of Appeals for the District of Columbia Circuit." 12 U.S.C. 5563(b)(4).

2. That said, since May 1, the CFPB has filed two complaints in federal court without consent orders, against SNAAC. The CFPB seems more willing to litigate than ever before.

3. As I discussed in a prior article, the PayPal consent further develops the CFPB's legal doctrine of "abusive" acts and practices. See http://www.reedsmith.com/CFPBs-Federal-Court-Action-Against-PayPal-Sheds-Further-Light-on-the-Meaning-of-Abusive-Acts-or-Practices-05-29-2015/.

4. Of course, the June 4 decision is the one contested case that the CFPB did not file in federal court. Since filing that matter in January 2014, the CFPB has filed no contested litigation through administrative proceeding.

5. As I discussed in an earlier client alert, the judge in CFPB v. ITT rejected the bureau's argument that TILA's statute of limitations does not apply in federal court, and she seemed to imply that the statute of limitations would not apply in an administrative proceeding. See http://www.reedsmith.com/CFPB-Updates-03-11-2015/.

This article is presented for informational purposes only and is not intended to constitute legal advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions