Judge Stays CFPB’s Suit Against Collection Firm Pending Supreme Court Ruling

A District Court judge handling a lawsuit filed by the Consumer Financial Protection Bureau against a collection law firm for allegedly violating the Fair Debt Collection Practices Act has decided to stay the case until after the Supreme Court issues a ruling in a case challenging the constitutionality of a federal agency being run by a single director.

The decision by Judge Sandra Feuerstein of the District Court for the Eastern District of New York will pause the case of CFPB v. Forster & Garbus until at least next Spring pending the outcome of the Supreme Court hearing arguments in Mnuchin v. Collins. This marks the second time that the CFPB’s case has been stalled while waiting for a ruling from the Supreme Court. Last October, Judge Feuerstein paused proceedings in the case pending a ruling from the Supreme Court in Seila Law v. CFPB, which, like the Mnuchin case, sought to question the constitutionality of a federal agency being run by a single director who could only be fired by the president for cause. In Mnuchin, the agency in question is the Federal Housing Finance Agency. The Supreme Court did find in Seila Law that a director who could only be fired for cause was unconstitutional.

The CFPB opposed the second stay and has been trying to proceed with discovery for several months. It originally filed the lawsuit in May 2019, alleging that the firm misrepresented the amount of attorney involvement in deciding whether to file lawsuits against individuals with unpaid debts. Forster & Garbus denied the allegations and said it “fully cooperated” with the CFPB during its investigation.

One of the questions posed to the Supreme Court in Mnuchin is: whether the court must set aside a final agency action that FHFA took when it was unconstitutionally structured and strike down the statutory provisions that make FHFA independent. Setting aside regulatory and enforcement actions taken by the agency while it was unconstitutionally structured is why Forster & Garbus asked Judge Feuerstein not to re-open the case yet.

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