The recent decision by the Fifth Circuit Court of Appeals holding the funding structure of the Consumer Financial Protection Bureau (CFPB) as unconstitutional was hailed by many in the debt collection industry as a long-overdue check on the seemingly unlimited power of this federal agency. (See The CFPB and the Fifth Circuit Ruling: 3 Things You Need to Know).

The CFPB was created in the last decade by a team of experienced politicians and constitutional scholars, yet surprisingly the CFPB lacks the recognized foundations of an effective and accountable federal agency like the Federal Trade Commission (FTC). For instance, the FTC leadership is a board of five commissioners, each nominated by the President, confirmed by the Senate and eligible to serve for a seven-year term. In contrast, the CFPB has a single director with an unlimited term that is removable at the pleasure of the President.  Further, the FTC is funded through budgetary appropriations and is required to submit a detailed annual budget to Congress for approval, in additional to itemized reports on its spending. The CFPB is not funded through Congressional appropriations and thus submits neither a detailed budget nor itemized reports of its spending to Congress.  

This lack of Congressional oversight regarding the leadership and funding of the CFPB resulted in this agency taking unfounded regulatory actions that are presently under judicial scrutiny. For example, the CFPB’s recent revisions to the financial services examination manual to include disparate impact is being challenged because the CFPB’s concept of disparate impact has previously been rejected by both the Courts and Congress. (See U.S. Chamber of Commerce and Other Trade Groups File Lawsuit Against CFPB Challenging UDAAP Update to Exam Manual)

Further, the CFPB continues its inexplicable silence on the issue of whether consumers are harmed by the use of letter vendors by collection agencies. More than one thousand aggrieved consumers here in the United States have retained counsel in the past 18 months to seek redress in the Courts asserting privacy harm arising from the receipt of collection letters sent by vendors. Further, millions of collection letters are mailed by letter vendors every day.  It must be apparent to the CFPB that any issue causing more than one thousand consumers in the United States to retain expensive private attorneys and file lawsuits on the same privacy issue affecting millions of written communications daily should warrant at least a footnote of commentary from the CFPB, a hulking federal agency with a budget now approaching $1 billion annually. (See Hunstein: Does CFPB Leadership Lack Courage and Vision?)

In September 2022, the 11th Circuit Court of Appeals substantially simplified for the CFPB the task of commenting on Hunstein when the Court held that there was no harm to a consumer when a collection agency uses a letter vendor (See Hunstein Isn't Over: 4 Things You Need to Know). The CFPB is certainly capable of issuing a one-sentence statement affirming its support for the 11th Circuit ruling that no consumer is harmed by use of a letter vendor for collection letters and confirm that this practice is allowed by the FDCPA.  The impact of such a statement by the CFPB would be to end litigation in more than 1,000 cases pending in Courts across the country, provide much-needed guidance for concerned consumers and their counsel and allow our judiciary to focus its limited resources on cases involving actual violations of the law and real consumer harm.  

This article is provided only as a general discussion of legal principles and ideas. Every situation is unique and must be reviewed by a licensed attorney to determine the appropriate application of the law to any particular fact scenario.  If you have a legal question, consult with an attorney. The reader of this publication will not rely upon anything herein as legal advice and will not substitute anything contained herein for obtaining legal advice from an attorney.  No attorney-client relationship is formed by the publication or reading of this document. Moss & Barnett assumes no liability for typographical or other errors contained herein or for changes in the law affecting anything discussed herein. 

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