Pub. 12 2017-2018 Issue 6

WWW.NEBANKERS.ORG 16 indefinite period of time after the relevant conduct took place. A much more logical, predictable interpretation of the agency’s authority is that the three-year limitations period in Section 2614 applies equally to CFPB court actions and CFPB administrative actions. And most importantly for our purposes, that is what the relevant statutes actually say. Further developments may follow. Obviously, the new direc- tor may have something to say about the position the CFPB will choose to take going forward. As for the PHH precedent itself, it should be noted that the case was focused on a specific issue under RESPA. RESPA is just one of many “enumerated consumer laws” enforced by the CFPB. 8 The CFPB can enforce those laws based on their specific provisions. Different technical statute of limitations arguments could apply under some of those other laws. 9 Whether such technical arguments ever become relevant may be open to question. The court’s firm rejection of the CFPB’s position may leave little room for the CFPB to maneuver in the space afforded by technical arguments. As indicated above, the court thought the CFPB’s position had little merit on general principles. The court also rejected the CFPB’s main legal argu- ment that administrative enforcement actions are not “actions” for statute of limitations purposes. 10 In addition to its power under enumerated consumer laws such as RESPA, the CFPB also has administrative enforcement powers with respect to Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) claims under Title X of Dodd Frank. The CFPB has previously taken and prevailed upon the view that UDAAP actions are not subject to Dodd-Frank’s statute of limitations. 11 Although UDAAP was not central to the PHH case, the result in PHH ar- guably does not bode well for the CFPB’s position regarding the applicability of statutes of limitations to UDAAP administrative enforcement actions. TheCFPB’s positiononUDAAP enforcement has been based on the same argument that it asserted in PHH (that administrative enforcement actions are not “actions” for statute of limitations purposes). That argument appears to have been clearly rejected in PHH. Before CaptainWillard terminates Colonel Kurtz’s command (with a machete) in "Apocalypse Now," he reflects on Kurtz’s ef- fectiveness in the field. In questioning what he was about to do, Willard noted that enemy activity in Kurtz’s sector had dropped to nothing 12 —the implied question being whether Kurtz’s actions were necessary or justifiable in order to effectively combat an adversary that might otherwise win the war. A similar question could be asked in the war between the CFPB and consumer lenders. A statute of limitations battle in that war now appears to have been won by the lenders.  1 In the beginning of the Vietnam War movie "Apocalypse Now," Colonel Lucas (Harrison Ford) orders Captain Willard (Martin Sheen) to terminate the command of a rogue officer, Colonel Kurtz (Marlon Brando). Kurtz is, to put it mildly, engaged in unconventional jungle warfare against the enemy. Those present in the scene want Kurtz stopped. General Corman remarks about Kurtz: “He’s out there operating without any decent restraint, totally beyond the pale of any acceptable human conduct. And he is still in the field commanding troops.” In response, Willard asks, “Terminate the Colonel?” A civilian present (CIA?) states, “Terminate with extreme prejudice.” 2 In Director Mulvaney’s words, the shift is motivated by “humility and prudence.” According to the director, the CFPB should exercise the almost unparalleled power Congress has bestowed on it to enforce the law faithfully in furtherance of the CFPB’s mandate but go no further. On this new path, the CFPB should equally protect the legal rights of all, including those regulated by the bureau. 3 PHH Corp. v. Consumer Fin. Prot. Bureau, 839 F.3d 1 (D.C. Cir. 2016), reh’g en banc granted, order vacated (Feb. 16, 2017), on reh'g en banc, 881 F.3d 75 (D.C. Cir. 2018). 4 PHH Corp. v. Consumer Fin. Prot. Bureau, 881 F.3d 75 (D.C. Cir. 2018). 5 The three-judge panel determined that the CFPB was bound by statutes of limita- tions. After being petitioned to do so, the D.C. Circuit agreed to rehear the case en banc (meaning that the full court, not just three of its judges, would reconsider the case). When the court agreed to do this, the earlier decision was vacated. As a result, the original panel decision—including the holding that the CFPB was bound by statutes of limitations—was lost. The en banc decision brought the three judge panel holding back: “We accordingly decide only [the] constitutional question. The panel opinion, insofar as it related to the interpretation of RESPA and its applica- tion to PHH and Atrium in this case, is accordingly reinstated as the decision of the three-judge panel on those questions.” Commentators have uniformly interpreted this as restoration of the original panel decision on the statute of limitations, among other things. 6 The CFPB is sometimes an easy target, but Congress might share some blame: the CFPB built its argument in part on the fact that Dodd-Frank included a statute of limitations in the section on litigation authority but not in the section on administra- tive authority. And, “absurd” or not, the CFPB’s position was not entirely without sup- port. The CFPB cited supportive Supreme Court precedent in BP Am. Production Co. v. Burton, 549 U.S. 84 (2006) (which was distinguished by the three-judge panel). The CFPB had also asserted that its view was consistent with prior positions taken by the Federal Reserve Board, the OCC, and the FTC. On the other hand, partway through the case, the CFPB appeared to partially back away from its position that there was no applicable statute of limitations. It pointed to the Supreme Court’s then just-released decision in Kokesh v. SEC, 137 S. Ct. 1635 (2017). The CFPB indi- cated that the statute of limitations relevant in Kokesh applied (28 U.S.C. § 2462; a five-year limit which was conveniently not a hindrance to what the CFPB was trying to do in PHH). PHH characterized this as “freelancing” by the CFPB, something that PHH’s counsel stated “merely underscores that the Director answers to no one but himself” (in other words, operating without any decent restraint?). 7 The opinion obviously addressed the issues in more detail than is reported here. Lawyers will be interested in the court’s treatment of some specific issues of statu- tory interpretation that are not addressed in this article. 8 In fact, the CFPB has already asserted and prevailed on the same view (that is, it is not bound by statutes of limitations) in the Electronic Funds Transfer Act (EFTA) and Truth in Lending Act (TILA) context. See the administrative law judge’s Order Deny- ing Motion to Dismiss in the CFPB action against Integrity Advance at https://files. consumerfinance.gov/f/documents/075_CFPB_Order_Denying_ Motion_to_Dismiss. pdf (which was based on the director’s administrative ruling in the PHH case [!], although the CFPB’s TILA position had also been upheld in CFPB v. ITT Educ. Servs., 219 F. Supp. 3d 878 (S.D. Ind. 2015)). In a sign that perhaps the former director was not operating “without any decent restraint,” it bears noting that the Integrity Advance matter was put on hold by the director pending the en banc ruling in PHH. As of the date this article was submitted for publication, further action in the Integrity Advance action was not yet evident in the CFPB’s online docket. 9 The Dodd-Frank provision on administrative enforcement authority for other enumerated consumer laws is qualified with: “unless such [other] Federal law spe- cifically limits the Bureau.” 12 U.S.C. §5563(a)(2). That sort of other specific limitation was relevant in PHH because the RESPA statute of limitations includes a limitation specifically applicable to the bureau. See 12 U.S.C. § 2614. Not all “enumerated consumer laws” enforced by the CFPB have statute of limitations provisions with such a specific limitation on the bureau. See, e.g., 15 U.S.C. § 1693m (the EFTA statute of limitations). 10 Another interesting aspect of that statutory interpretation argument was raised in Integrity Advance where there was a counterargument that if administrative enforcement actions were not “actions,” then perhaps the CFPB did not even have authority to bring UDAAP claims in an administrative forum (because the statutory provision authorizing UDAAP claims also uses the word “action”). The administrative law judge (ALJ) dispensed with this by observing that in some contexts “action” meant one thing and in other contexts it meant something else. Statutory interpre- tation is a beautiful sight to behold. 11 See the Integrity Advance action referenced in footnote 8. 12 “Enemy activity in his old sector dropped off to nothing. . . . The army tried one last time to bring him back into the fold. And if he pulled over, it all would have been forgotten. But he kept going, and he kept winning it his way, and they called me in. They lost him. He was gone. Nothing but rumors and rambling intelligence, mostly from captured VC. The VC knew his name by now, and they were scared of him.” For more information, contact Bryan Handlos at Kutak Rock LLP at (402) 346-6000 or bryan.handlos@kutakrock. com. Handlos is a member of Kutak Rock LLP’s banking practice group where he concentrates on bank regulatory matters. Counselor’s Corner — continued from page 13