Judge Dismisses Credit Repair Org. Suit Against CFPB, FTC

A District Court judge in Florida has granted a motion to dismiss after the Consumer Financial Protection Bureau and the Federal Trade Commission were sued by a trade association representing credit repair organizations that accused the regulators of overstepping their constitutional authority and that the Telemarketing Sales Rule is unconstitutional.

A copy of the ruling in the case of NACSO Non-Profit Business League v. CFPB and FTC can be accessed by clicking here.

The plaintiff filed suit last year after two of its members were the subject of enforcement actions by the CFPB — one was sent a Civil Investigative Demand letter and the other was sued for allegedly violating the Telemarketing Sales Rule (TSR). It sought a judgment against the FTC for promulgating the TSR, a judgment against the CFPB because the TSR is an unconstitutional content-based restriction on free speech, and a judgment against both agencies because the TSR is underinclusive and not narrowly tailored.

The defendants filed a motion to dismiss, claiming the Court lacked subject-matter jurisdiction because the six-year statute of limitations to contest a rule under the Administrative Procedures Act had expired. The TSR was published in the Federal Register back in 1995, meaning the six-year statute of limitations expired two decades ago. The plaintiff attempted to argue that the most recent application of a rule — such as when it is used in an enforcement action or lawsuit — is when the statute of limitations clock starts running, but Judge Raag Singhal of the District Court for the Southern District of Florida, disagreed.

The plaintiff also attempted to argue that the CFPB was increasing its application of the TSR by encouraging consumer reporting agencies not to investigate disputes submitted by credit repair organizations that are determined to be frivolous or irrelevant. But this was just a policy statement and did not rise to the level of being a final agency action, Judge Singhal noted.

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