Archives for January 2023

The COVID-19 pandemic created record amounts of unexpected medical debt for consumers, which only exacerbated the growing amount of delinquent medical debt. Even before the pandemic, federal and state legislators and regulators identified what they believed to be fundamental flaws in how medical services are billed and what understanding consumers have of their financial responsibility for these services.

Last year saw an influx of federal and state regulation aimed at what information must be conveyed to consumers in anticipation of the provision of medical services as well as restrictions on the collection of medical debt. Expect more activity in 2023.

Federal Regulation of Medical
Debt

The No Surprises Act, effective Jan. 1, 2023, created new federal protections for consumers against “surprise medical bills.” The NSA regulates how medical providers may bill consumers for services and specifically bans surprise bills for emergency services, bans higher co-pays for out-of-network services, bans out-of-network charges for services provided during in-network facility visits, requires medical providers to provide consumers with notice of the NSA protections, and requires medical providers to provide uninsured consumers an up-front good faith estimate of costs for services.

On the heels of the NSA, the Consumer Financial Protection Bureau issued its first bulletin regarding the collection and credit reporting of medical debt. The bulletin’s purpose functioned as a refresher of sorts, reminding those who operate in the medical debt realm to comply with the Fair Debt Collection Practices Act and the Fair Credit Reporting Act.

Importantly, the bulletin concluded that medical debt posed a “special risk” to consumers because medical debt is typically an unanticipated indebtedness, consumers are not always advised of the costs of medical services in advance, and there is no real “marketplace” for medical services where consumers can shop for the best value. The CFPB also pointed to a lack of consumer education regarding medical insurance and how they can identify potential billing errors.

The CFPB warned it is targeting abusive medical debt collection, specifically collection of amounts not properly owed by operation of the NSA and will “closely review the practices of those engaged in the collection or reporting of medical debt.” To this end, the CFPB reminded credit reporting agencies (“CRAs”) and furnishers that they must have in place and follow reasonable procedures to assure the accuracy of the information being reported and furnished, as well as for investigations and dispute resolution.

In March of 2022, the CFPB issued its “official report” on the burdens faced by consumers created by medical debt. The report’s key findings were that as of June 2021 there was approximately $88 billion in medical debt reflected on consumer credit records, with most of the related tradelines being $500 or less. As of 2021, 58% of all consumer tradelines were medical debt, which, the report added, were negatively impacting credit scores.

The CFPB believed such tradelines were not a good predictor of creditworthiness, and significantly and disproportionately impacted certain communities. It concluded that current practices related to medical debt collections and credit reporting can cause “significant harm” to consumers. It also warned that CRAs and furnishers who fail to have reasonable procedures in place to assure that medical debt information is accurate will be held accountable.

Coming as no surprise, also in March of 2022, the CRAs responded to the CFPB’s official report by identifying changes they were implementing. Specifically, beginning July 1, 2022, defaulted medical debt placed for collections and which had subsequently been paid would no longer appear on a consumer credit report, diverging from the text of the FCRA, which allows for defaulted debt to be reported for seven years, regardless whether it has been paid.

The CRAs also stated that defaulted medical debt will not be reported until one year after default, diverging from the CRAs’ prior policy of reporting same after six months. And, beginning March 30, 2023, the CRAs will not place medical debts with furnished balances below $500 on a consumer report.

In April of 2022, the CFPB issued a bulletin illustrating how medical billing and collections may negatively impact consumers. The bulletin identified the most common consumer complaints regarding medical debt as (1) not recognizing or disputing that they owe a medical debt; (2) that collection notices either contained too little information regarding the nature of the debt or too much personal medical information; and (3) that medical debt was being credit reported improperly.

The CFPB added, this “strongly suggest[s] that many medical bills reported on credit reports are disputed, inaccurate, or not owed” and that it intends to “hold bad actors in the consumer financial services marketplace accountable.”

State Regulation of Medical
Debt

Last year saw several states enact laws similar to the NSA to regulate medical debt and its collection. The state laws share common themes including:

• providing greater protections to indigent patients by limiting the actions creditors and collectors can take to recover balances owed

• requiring notice to be provided to consumers prior to collection activity beginning with an opportunity to cure any default

• requiring the provision of detailed information regarding a medical debt

• limiting the legal remedies and recourses available to recover on a medical debt, including limits on the ability to bring a suit and executing on any judgment obtained on a medical debt

What to Expect in 2023

In late November, a bill was introduced in the U.S. Senate by Sen. Chris Murphy (D-Conn.) taking aim at the collection of medical debt, S. 5150, the Strengthening Consumer Protections and Medical Debt Transparency Act.

The legislation would provide for certain consumer protections related to medical debt collection applicable to both the medical provider as well as any “debt collector,” as defined by the FDCPA. It would also limit a medical provider, or its debt collector, from engaging in “extraordinary collection actions” (“ECAs”) prior to satisfying various conditions.

ECAs are defined to include selling an individual’s debt to another party; reporting adverse information about the individual to consumer credit reporting agencies or credit bureaus; deferring or denying, or requiring a payment before providing, medically necessary care because of an individual’s nonpayment of existing medical debt; and actions that require a legal or judicial process.

Among the conditions that must be satisfied before engaging in an ECA, the bill requires a healthcare provider or its debt collector to determine if the patient qualifies for financial assistance via state or federal programs, or via the facility’s own charity or assistance programs. It also prohibits engaging in an ECA until the expiration of a 180-day period beginning on the date on which an initial bill is sent to the consumer. The legislation would also prohibit an ECA from commencing (or require it to be halted) if notice is provided that a health insurance coverage appeal is pending.

Beyond ECAs, the bill would require that, prior to any collection activity, the medical provider or its debt collector “make all reasonable efforts to confirm the identity of the debtor.” It would also require the patient consumer to be provided with “an easy-to-understand itemized statement” of the debt owed prior to any debt collection activity along with a copy of any receipts for any payments made on the debt within 30 days of any such payment.

The message should be received by the receivables management industry loud and clear: medical debt is an area of great concern for state and federal regulators and lawmakers. The industry needs to respond accordingly by ensuring compliance with the newly enacted laws, including the NSA and state regulations. This includes revamping policies and procedures related to resolving consumer disputes of medical debt and ensuring the accuracy of any medical debt being furnished.

The accuracy and propriety of medical debt balances being collected upon and credit reported will face heightened scrutiny from regulators and, in turn, the consumer bar who will no doubt focus more attention on medical debt collection. It will be thorough and detailed policies and procedures with documented compliance that will address the heightened scrutiny over medical debt collection in 2023.

ROCHESTER, N.Y. — Continental Service Group, Inc., d/b/a ConServe, is a devoted community partner that strives to make the world a better place.  Through the organization’s ongoing philanthropy program, ConServe Cares, the ConServe team supports and funds the efforts of numerous local non-profit agencies that make a difference in our communities.  As a result of the employees’ compassion and generosity, countless lives have been touched and enriched.

In the month of December, the ConServe team along with their organization’s corporate “Matching Gift Program”, donated to ConnectLife.  George Huyler, Vice President of Human Resources at ConServe said, “ConnectLife’s commitment to educate and inspire blood donations in our communities is essential.  We are so proud and thankful to those employees that give so generously each month to our ConServe Cares program and support ConServe’s mission to ‘improve the human condition.’  By donating to organizations like ConnectLife, our employees can feel good that they are helping to save lives and improve our communities.”

Sarah R. Diina, Senior Director Marketing & Community Development said, “We are so grateful to have ConServe as a partner in saving lives, and we are so appreciative for their generous donation.  Thanks to their support, ConnectLife will be able to continue to further our education and awareness efforts across the community, and ultimately save more lives.”

About ConServe

ConServe is a top-performing accounts receivable management service provider specializing in customized recovery solutions for their Clients. Anchored in ethics and compliance, and steadfast in their pursuit of excellence, they are a consumer-centric organization that operates as an extension of their Clients’ valued brands.  For over 37 years, they have partnered with their Clients to provide unmatched customer service while simultaneously helping them achieve their accounts receivable management goals.  Visit us online at: www.conserve-arm.com  

About ConnectLife  

ConnectLife helps people help others. As a federally designated not-for-profit organ procurement organization and community blood bank, we save and enhance lives through organ, eye, tissue and blood donations.  Visit them online at:  www.ConnectLife.org

WEST SENECA, N.Y — P&B Capital Group LLC was honored to make a financial contribution this holiday season to the We Defy Foundation, a 501(c)3 organization providing combat veterans coping with military-connected disabilities a means to overcome challenges through Brazilian Jiu-Jitsu and fitness training. 

“Veteran care is important to us at P&B, as is personal fitness training. When we learned about what this organization is doing, we were impressed and wanted to be a part of it. They need corporate partners to do what they do and we are honored to do what we can to contribute,” said Ryan Kazmark, P&B Managing Partner. Kazmark spent 8 years total as a member of the 82nd Airborne Division — as Staff Sergeant in the US Army and later as part of the US Army Reserve.

Nationwide Training Facilities

WDF Training Facilities are located throughout the United States, and may even be located in your area according to the WDF facility map. The organization continues to seek out top-quality gyms, donors for the scholarship program, and volunteer ambassadors. Partnering with existing gyms allows the mission to grow in areas where eligible veterans have a need. According to the website, it costs an average of $2,500 to cover the costs of a one-year Jiu-Jitsu scholarship. 

Clothing with Purpose

Another method of supporting the organization is to purchase merchandise such as t-shirts, hoodies, decals, and hats. The 2022 Winter Collection is available for purchase here. The organization’s Board is run by volunteers who are passionate about Jiu-Jitsu as a long-term healing tool for helping disabled combat veterans cope with physical and mental health challenges. 

WDF Info & Stats

According to wedefyfoundation.org, the organization saw 500k raised in 2021 and was able to provide over 600 athlete scholarships in over 500 affiliate gyms across 45 states. The therapeutic healing provided through the sport of Jiu-Jitsu empowers veteran athletes “through integrity, discipline, personal accountability, mental and physical development, improved coordination, flexibility, adaptability, confidence, patience, and selfless service.”

About P&B Capital Group, LLC

P&B Capital Group, LLC is a nationally licensed, third-party collection agency that services non-performing accounts receivable and loan portfolios with compliance, transparency, and respect. We help consumers understand and resolve their financial obligations while providing improved cash flow for our creditor clients.

Creditors and debt collectors may rest assured that they are not violating the Fair Debt Collection Practices Act (FDCPA) when sending debt-collection communications prior to any knowledge of a debtor’s bankruptcy filing. In Carrasquillo v. CICA Collection Agency, Inc., the district court for the District of Puerto Rico relied on a Third Circuit case when finding a debt collector lacked the requisite knowledge and intent to violate § 1692e of the FDCPA. Consequently, the court dismissed the debtor’s case with prejudice — barring the debtor from bringing this specific FDCPA claim against the debt collector again.

As background, the plaintiff did not notify the debt collector, CICA Collection Agency, Inc. (CICA), of his bankruptcy filing prior to the debt-collection communication at issue. Although, the creditor and non-party to the action, Claro Puerto Rico (Claro) was listed on the bankruptcy petition, Claro also failed to inform CICA of the plaintiff’s bankruptcy filing. After receiving the debt-collection communication, the plaintiff, through his bankruptcy attorney, filed suit against CICA for violation of § 1692e of the FDCPA. The plaintiff alleged that at the time CICA mailed the debt-collection letter to him, CICA knew or should have known that he had filed for bankruptcy and was under the protection of the bankruptcy code. The court found the plaintiff’s arguments unpersuasive.

Specifically, the court articulated that “a debt collector’s unknowing violation of an automatic [bankruptcy] stay does not transform an otherwise accurate collection letter into a ‘false representation’ within the meaning of § 1692e,” on the other hand, a “false representation under § 1692e(2)(A) requires that the misrepresentation be intentional.” The court found that the provision prohibiting debt collectors from using false or misleading representation in the collection of any debt was not intended to punish debt collectors for failing to discover a debtor’s bankruptcy filing, but was instead intended to prohibit only knowing or intentional conduct by debt collectors.

The court did not penalize the debt collector for its lack of knowledge or even lack of diligence in determining whether the debtor was protected by the bankruptcy code before mailing the debt-collection letter. Instead, it appears the court penalized the debtor for failing to notify the debt collector of the bankruptcy filing resulting in dismissal of the claim with prejudice. Had the plaintiff informed CICA of his bankruptcy petition, and CICA nevertheless mailed out the collection letter following notice, the plaintiff’s claim may have survived.

DENVER, Colo — Harvest Strategy Group Inc. made a charitable contribution to the Abdorrahman Boroumand Center (ABC) for Human Rights in Iran. The compelling stories of the organization and its backstory are detailed on the website, iranrights.org. The nonprofit organization is working towards peaceful transition in Iran by documenting human rights abuses and promoting democratic values. 

ABC for Human Rights

ABC works to expose the ongoing government obstruction of rights and freedoms—freedoms that one may take for granted in a democratic nation: the right to a fair trial, the right to defend oneself in a court of law, the freedom to grow up without being forcefully married as a minor, the right to leave an abusive marriage, and more. The human rights abuses extend to women, children, and men alike, with politically motivated and government-sponsored censorship, manipulation, violence, arrests, and executions prevalent in the regime under ultimate and unchecked authority given to an unelected religious leader. 

Iranian Legal Climate

“In our part of the world, these kinds of abuses may feel distant, obscure, or even forgotten. While we remain committed to local outreach, we believe in focusing on the causes that matter to us most and this is one of them. We’re mindful of the legal protections, processes, and freedoms we enjoy—and the lack thereof in other more oppressive environments. In places like Iran, lawyers are routinely persecuted. Freedom of speech and the right to a fair trial, among other civil liberties, are still not available in some countries,” said David Ravin, Executive Vice President at Harvest Strategy Group. 

A Larger Mission

Harvest has a three-part mission as shown below.   Social influence is one of its three pillars because businesses exist for more than just financial gain. Businesses that support social causes can have an impact far beyond their own industry or geography. Improving the quality of life for someone in need is truly a business objective worth celebrating.  

Service: To lead the accounts receivable management industry in partnerships, service, technology and the delivery of superior results.

Economic: To operate the Company for profitable growth, increasing value for our stakeholders and expanding opportunities for development career growth for our employees.

Social:  To operate the Company in a way that actively recognizes the central role that business plays in our society by supporting our local community and those in need. 

About Harvest Strategy Group

Harvest Strategy Group provides single-point-of-contact, nationwide recovery management services for banks, finance companies, debt buyers, and credit unions. The company fosters an entrepreneurial environment and encourages its staff to challenge boundaries, think outside the box, and feel a sense of ownership and accountability for results. The Harvest team’s mission is to lead the accounts receivable management industry through strength in partnerships, exceptional service, and the delivery of superior results. To join the team, apply to Harvest Strategy Group online.

Once a litigation strategy is underway, changing course is not always easy. A debt collection firm recently learned this lesson the hard way when its timely attempt to transfer a case out of state court and into federal court was denied. According to the Fourth Circuit Court of Appeal, by initially participating in the state court action, a law firm waived its ability to remove its case to federal court.

In Redman v. Javitch Block, LLC (Case No. 21-2236), after successfully moving to vacate a default judgment, a consumer filed a state law class action suit against the collection law firm, Javitch Block, LLC (Javitch). The suit was subsequently amended to include allegations under the Fair Debt Collection Practices Act (FDCPA). Fourteen days after the consumer brought the FDCPA claims, Javitch filed a motion to dismiss the lawsuit. A few days later, the state court judge recused himself, and the judge who vacated the default judgment was assigned to the case. Hours later, Javitch filed a timely notice to transfer the case to federal court. 

In federal court, the consumer argued that the case should be transferred back to state court because Javitch continued to litigate in state court after the FDCPA claims were filed and thus could no longer remove the action. The district court agreed, holding that by filing that and other motions, Javitch waived its right to transfer the case to federal court. 

Javitch appealed, arguing that the motion to dismiss it filed in the state court did not prevent it from transferring the action. The Fourth Circuit disagreed, reasoning that engaging in defensive litigation, such as filing a motion to dismiss, indicates an intent to waive the right to remove and stay in state court. The Fourth Circuit also noted that by litigating in state court and only filing their notice of removal when the case was transferred to a particular judge, was essentially forum shopping.

You can read the opinion here. 

InsideARM’s Perspective

This case is a good reminder that in litigation, it is always essential to consider your next steps thoughtfully. As the law firm found out in this case, everything filed can have an effect on the potential next steps. Extenuating circumstances (like the appointment of a new judge) may not be enough to allow a deviation from a previously chosen path. It is wise to evaluate all options with counsel at the outset to ensure you don’t give a future court any reason to believe you have waived any of your legal rights. 

COPLEY, OH — DebtNext Software, a leading fintech software provider focused on recovery management solutions, is proud to announce new positions for several employees. Thom Majka will be starting a new role as Director of Client Success, Andy Hannan will embark on his new position as Director of Product Innovation, and Eric Port will take on a new position as Director of Operations.  

Thom has been the Director of Business Development for DebtNext Software since 2006. His 47 years of industry experience bring tremendous value to his new role that will complement client understanding of the DebtNext product and service offerings.  

“I’ve been fortunate to have been a part of DebtNext’s success and client growth for the past seventeen years. I’m looking forward to developing a focused communications medium with clients and their respective business users to listen, learn, and be accountable. Building trusting relationships has been and will be my daily pursuit for our vendor partners and mutual clients they service,” says Thom. 

Andy Hannan has been with DebtNext since 2013 and has been a part of the accounts receivables management industry for over 20 years. In his new role as Director of Product innovation, Andy will use his unique ability to be creative, energetic, and forward thinking to continue to play a critical role in the development of DebtNext Software products.  

“I am looking forward to continue working with a creative and curious team, developing a product that strives to create function rich solutions that empower customers,” says Andy. He will enable and contribute to a culture and process of innovation, identifying key business problems and ushering the development of solutions for DebtNext clients.  

Eric joined the DebtNext team in 2008 and brings a wide breadth of industry knowledge and platform experience.  In his new role as Director of Operations, Eric will be responsible for administering recurring client platform reviews as well as the management of contractual relationships with DebtNext clients. He will ensure that DebtNext is delivering the proper level of support to their growing client base.

Eric is excited about the opportunity, “The DebtNext platform has evolved into one of the most robust recovery management platforms in the industry.  It’s exciting to be a part of that.  I look forward to building on existing client relationships and ensuring our level of support is in line with client expectations,” he says.

“Our company would not have enjoyed the growth we have over the past twenty years without leaders like Thom, Andy, and Eric. We are continually evolving our client coverage and product teams and these positions are a direct reflection of Thom, Andy, and Eric’s efforts in those areas,” said Paul Goske, President of DebtNext Software. “We’re excited about continuing to build on our team’s success and grow our Platform’s functionality for our clients.” 

About DebtNext  

Founded in 2003 as a fintech software provider, DebtNext has been focused on recovery management solutions for their clients. Their industry leading platform, dPlat, is being used by some of the nation’s largest utility, telecommunications, financial services, and accounts receivable management firms. With an emphasis on client relationships, DebtNext is proud to help their clients achieve maximum operational efficiency and gain a competitive advantage.  To learn more about DebtNext, visit www.debtnext.com.

DES PLAINES, Ill. — Asset Recovery Solutions, a nationally licensed Illinois based provider of First Party, Third Party, BPO, and MSA services is pleased to announce the promotion of Patrick Kelly to Vice President of Operations.

Prior to joining the ARM industry, Patrick studied at The Ohio State University. His career path over the last 25 years has led him from OSI, Arrow Financial, and GRC to a key role as Director of Operations for Asset Recovery Solutions, LLC. 

Since becoming part of the ARS family in 2014, Patrick has continued to cultivate his professional skillset. Over the last nine years, his contributions have been recognized by ARS ownership as well as our varied clientele.  Pat’s attention to detail, firm stance on compliance, and always putting the client’s best interest first are a few traits that contribute to his success.  

Joel Bernheim, EVP of Operations at ARS commented that ‘Pat has been an invaluable member of our team. As such, he is instrumental to our plans for continued growth and diversification. We believe that Pat’s leadership of ARS servicing activities has been and will continue to be one of the keys to our success.’

In Patrick’s free time, he is a die-hard fan of The Ohio State Buckeyes, enjoys barbequing for friends, and is a great husband to his wife Mandi and father to their four kids.

Please join us in congratulating Patrick on his well-earned promotion.

Community Financial Services Association (CFSA) has filed its brief in opposition to the CFPB’s certiorari petition seeking review of the Fifth Circuit panel decision in Community Financial Services Association of America Ltd. v. CFPB.  In that decision, the panel held the CFPB’s funding mechanism violates the Appropriations Clause of the U.S. Constitution and, as a remedy for the constitutional violation, vacated the CFPB’s payday lending rule (Rule).  CFSA also filed a cross-petition for certiorari in which it asks the Supreme Court to review the Fifth Circuit’s rejection of the other grounds on which CFSA claimed the Rule was unlawful.  The CFPB has indicated that it will reply to CFSA’s cross-petition by January 25 and it appears that the CFPB does not intend to file a reply to CFSA’s brief in opposition to its certiorari petition.  The Supreme Court is expected to consider both the CFPB’s certiorari petition and CFSA’s cross-petition at its February 17 conference.

Opposition to certiorari petition  

In its opposition to the CFPB’s certiorari petition, CFSA makes the following principal arguments in support of its position that the Court should deny the petition:

• As established by legislative history and case law, the role of the Appropriations Clause is to ensure Congressional oversight of federal fiscal matters and restrain the Executive Branch’s exercise of power

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• The CFPB’s funding mechanism nullifies Congress’s appropriations authority in an unprecedented manner “by allowing a single Congress to unite purse and sword for an Executive agency that it wishes to permanently shield from political accountability, unless and until the President and both chambers of Congress agree to restore fiscal oversight.”  The CFPB has the ability to self-determine the amount of its funding, subject to an “illusory” cap.  In addition, the CFPB can retain its unused funds, effectively creating a “‘permanently available’ endowment ‘without any further act of Congress,’” there is no temporal limit on Congress’s ceding of its appropriations power to the CFPB “because it operates in perpetuity,” and there is no limitation on the CFPB functions that are funded.  Should “the people’s representatives try to take back the power of the CFPB’s purse, the President or either chamber can unilaterally ‘veto’ that effort.”  

• The CFPB’s funding mechanism is unprecedented in nature in that “[n]o other agency from the Founding until 2010 appears to have been permanently ceded the power to choose the amount of its own public funding for core executive powers.”

• The CFPB’s argument that a statute passed by Congress satisfies the Appropriations Clause ignores the Clause’s text and context.  “Deciding the amount that an agency may draw from the government’s accounts is the key legislative function that the Appropriations Clause vests ‘exclusive[ly]’ in Congress…..[U]nder any standard, it is ‘delegation running riot’ to grant a law-enforcement agency perpetual authority to fill in a blank check from the federal fisc every year so long as it does not exceed more than half a billion dollars (plus inflation adjustment).” (emphasis included).

• The CFPB is not comparable to other agencies funded outside the appropriations process through sources such as fees, assessments, or investments.  “[T]hese agencies are in an entirely unrelated family, given their historical pedigree and compatibility with the political accountability concerns animating the Appropriations Clause.”  The practice of funding certain agencies such as the Post Office and National Mint through fees they charge for services they render was authorized by the earliest Congresses, providing evidence of constitutionality.  Even if Congress “might be thwarted in taking back the purse-strings from such agencies, [there is political accountability because] the people have some ability to do so directly [by refusing to buy the agencies’ services.]”  The practice of funding certain agencies such as the OCC and FDIC through assessments they charge to entities they regulate began in the early 1900s, also making it a practice that is “‘long settled and established.’”  This practice also preserves some level of political accountability because these regulators “must consider the risk of losing funding if regulated entities exit their regulatory sphere due to excessive regulation.”  The Federal Reserve also fits within this funding tradition and “’is in a totally different league’” from the CFPB because of its limited regulatory and enforcement authority.

• Vacatur of the Rule was the appropriate remedy.  Because the Bureau could not have promulgated the Rule without the unconstitutional funding, it did not have the power to do so.  It does not matter if the Bureau had statutory authority to promulgate the Rule or whether it would have promulgated the Rule if validly funded.

• The Fifth Circuit decision does not warrant review because it is poor vehicle for the Appropriations Clause question.  The judgment only vacates a single CFPB regulation that has never gone into effect and the vacatur can be affirmed on two independent, alternative grounds that were rejected by the Fifth Circuit.  Constitutional avoidance principles require the Supreme Court to consider those grounds first and only reach the Appropriations Clause question if does not agree with CFSA on either one.  It makes little sense for the Supreme Court to accept discretionary jurisdiction given the possibility that it will disagree with the Fifth Circuit on the alternative grounds and be unable to reach the constitutional question.  In these circumstances, the Court should allow “further percolation on the novel constitutional question.”  The alternative grounds for vacating the Rule are:

1. The Rule was promulgated under former Director Cordray, who was unconstitutionally insulated from removal by former President Trump; and

2. The conduct prohibited by the Rule falls outside the statutory definition of unfair or abusive conduct.

CFSA concludes its opposition brief by urging the Supreme Court, if it decides to grant certiorari, to hear the case next term rather than this Term as the CFPB has urged.  CFSA argues that it is “neither necessary or appropriate to try to resolve a case of this complexity and importance in just four months during the busy conclusion of a momentous Term.”  CFSA comments that despite the Fifth Circuit decision, the CFPB “continues to plow full steam ahead, initiating and pursuing enforcement actions and even recently proposing new regulations.”  It also observes that if it is concerned about the decision’s impact on the CFPB’s ongoing activities, the Administration can seek interim appropriations until the Court resolves the Appropriations Clause issue.

Cross-petition for certiorari

While reinforcing its opposition to the CFPB’s certiorari petition, CFSA urges the Court, if it grants the CFPB’s petition (1) to also grant its cross-petition to consider the alternative grounds for vacating the Rule that the Fifth Circuit rejected or, (2) instead of granting the cross-petition, to consider the alternative grounds as antecedent questions added to the CFPB’s petition.  CFSA frames the alternative grounds as the following questions:

• Whether the Rule should be vacated because it was promulgated by Director Cordray while shielded from removal by President Trump under a statutory provision this Court later held is unconstitutional.

• Whether the Rule should be vacated because the prohibited conduct falls outside the statutory definition of unfair or abusive conduct.

With respect to the first question, CFSA argues that because the unconstitutional removal provision is what allowed Director Cordray to remain in office against President Trump’s wishes and promulgate the Rule by exercising powers of the Director’s office that he did not lawfully possess, the Rule is directly attributable to, and tainted by, the unconstitutional provision.  In such circumstances, vacatur is the standard and proper remedy.  The Fifth Circuit’s demand that CFSA provide evidence that the President’s hypothetical replacement for Director Cordray would have acted differently with respect to the Rule is at odd with Supreme Court precedent.  (The Fifth Circuit did not consider the CFPB’s argument that even if Director Cordray unlawfully promulgated the Rule, former Director Kraninger lawfully ratified the Rule after Seila Law made her removable at will by the President.  Nevertheless, CFSA calls the CFPB’s argument “clearly wrong” and asserts that unlike some agency actions, notice-and-comment rulemaking cannot be ratified by a later official.)

With respect to the second question, CFSA argues that the Rule’s provision that prohibits lenders from continuing to attempt preauthorized withdrawals for repayment from consumer’s bank accounts after two failed attempts exceeds the CFPB’s statutory authority to prohibit unfair or abusive conduct.  In exercising such authority, the CFPB cannot prohibit conduct where consumers are capable of reasonably avoiding the harm caused by such conduct.  Consumers can reasonably avoid additional fees or other harms caused by successive withdrawal attempts in various ways, such as declining loans that preauthorize successive withdrawal attempts, funding their accounts before the repayment date, or revoking access to their accounts if they lack the necessary funds.