Last week, we wrote about how the Bureau of Consumer Financial Protection (“Bureau”) under Acting Director Mick Mulvaney had surprisingly doubled down on claims of unfair, deceptive and abusive practices (“UDAAP”) brought under former Director Richard Cordray in a case against a lead aggregator (back when the Bureau referred to itself as the Consumer Financial Protection Bureau). As if to prove the point that the Bureau is not backing off aggressive UDAAP claims, the very next day the Bureau filed a brief in another case similarly supporting novel UDAAP claims brought under Cordray. The Bureau’s brief was filed in opposition to a motion to dismiss by defendants Think Finance, LLC and related entities. The case involves Bureau claims that Think Finance engaged in unfair, deceptive and abusive conduct when it attempted to collect on loans that were, according to the Bureau, void under state law.
We’ve previously written about the Bureau’s novel theory in this and other cases, which goes like this: if a state law renders loans made by unlicensed lenders or loans in excess of the state usury rate void as a matter of state law, then any attempt to collect on such loans is unfair, deceptive and abusive as a matter of federal law. Earlier this year, the Mulvaney-led Bureau dismissed another lawsuit that was based on this legal theory, suggesting that the Bureau may no longer pursue it. And just a week after that dismissal, a federal court that had previously granted the Bureau summary judgment against Cash Call on a deception claim based on this theory rejected the Bureau’s broad consumer restitution and civil money penalty demands. In rejecting those demands, the Cash Call court noted that “the evidence indicated quite clearly that consumers received the benefit of their bargain—i.e., the loan proceeds…. Defendants plainly and clearly disclosed the material terms of the loans to consumers—including fees and interest rates—before the loans were funded.” And the court also noted that before the court’s summary judgment decision “there was no case law that clearly established” that collecting on loans rendered void by state law “would subject Defendants to liability under the [Dodd-Frank Act].”
If any case cried out to be the poster child of Mulvaney’s public exhortations against “regulation by enforcement,” therefore, the case against Think Finance would appear to have been it, given the support that the Cash Call decision would have lent a decision not to pursue it. But in the brief it filed last week, the Bureau did not back down from its claims. Instead, it argued that collecting on loans rendered void under state law was unfair, deceptive and abusive under the Dodd-Frank Act. And it expressly rejected defendants’ “regulation by enforcement” argument that the Bureau’s claims would violate due process because the defendants were not on “fair notice” of what conduct is prohibited by the Dodd-Frank UDAAP prohibition.
It remains to be seen if the Bureau’s actions will match Mick Mulvaney’s rhetoric, but its recent filings in federal court suggest that the reports of UDAAP’s demise may be exaggerated.