Daily Digest - March 3, 2025

🎂🎉 Happy Birthday to: Nick Jarman from Credit Control, Casadie Mikucki from Vivint, and Andrea Tromberg from Tromberg, Morris & Partners. Happy belated Birthday to: Will Turner from TEC Services Group (March 2) and Marty Lapidus from ProVest (March 2). 🥳🎁

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‘Five Guys and a Phone': Is This the Future of the CFPB?

A new set of declarations from current and former CFPB employees sheds light on the Trump administration's plan to nearly eliminate the Consumer Financial Protection Bureau. These filings, submitted as part of a lawsuit aimed at halting mass firings at the agency, detail how officials planned to strip the Bureau down to just a “room with five men and a phone.” The declarations, filed in a lawsuit against the Bureau and its Acting Director by the union representing CFPB employees, also reveal that key agency functions, including monitoring consumer complaints, have been severely disrupted under Acting Director Russ Vought’s leadership.

Details:

• Mass Firings: According to testimony from employees identified as Alex Doe and Drew Doe, Vought and other Trump officials ordered the agency to “wind down” operations, with a plan to fire the vast majority of the Bureau's 1,700 staff members. Employees were told that only five positions — those mandated by the Dodd-Frank Act — would remain. Vought’s team also moved to cancel contracts and end critical functions, such as the Consumer Complaint Database.

• Disruption of Key Functions: Declarations from employees like Matthew Pfaff and Erie Meyer reveal that the Bureau’s consumer complaint system has essentially been halted. With the stop-work order in place, only automatic processing continues, leaving thousands of complaints in limbo. As of now, about 10,000 complaints await manual review. Additionally, the position of student loan ombudsman has been left vacant, further impairing the agency’s ability to assist consumers.

• Canceling Contracts: Charlie Doe, a contracting officer at the CFPB, testified that the Trump administration rapidly canceled nearly $200 million worth of contracts, including those for expert witnesses and cybersecurity services. This unprecedented termination of contracts is expected to have lasting effects on the Bureau’s ability to enforce consumer protection laws.

• CFPB Headquarters Shutdown: According to Adam Scott, the CFPB's Director of Digital Services, Vought ordered the agency’s homepage to be deleted, making it harder for consumers to access the Bureau’s resources. The building’s signage has been taken down, and the lease for the headquarters is being canceled.

• Court Intervention: A federal judge temporarily blocked mass layoffs and work stoppage orders after a legal challenge from the National Treasury Employees Union (NTEU). However, the Trump administration continues to argue that it only intends to “streamline” the CFPB, despite significant disruptions that have already occurred.

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CFPB Drops Another Lawsuit, But Plans to Continue Prosecution of At Least One Enforcement Action From Previous Regime

The Consumer Financial Protection Bureau and TransUnion on Friday filed a joint stipulation of dismissal of a lawsuit filed by the regulator against the credit reporting agency in 2022 that accused the company and one of its executives of violating a 2017 order issued by the Bureau.

• The background: The CFPB's amended complaint, filed on May 24, 2023, alleges that TransUnion and the executive violated multiple provisions of the Consumer Financial Protection Act (CFPA) by enrolling consumers in negative option products without consent, failing to provide a simple cancellation process, and not offering required disclosures. The Bureau also accused TransUnion of deceptive marketing practices, including misleading claims about the pricing and characteristics of its credit-related products, such as misrepresenting their costs as “free” or $1, and falsely stating that consumer payment information would be used solely for identification purposes. Additionally, the CFPB alleged that TransUnion violated the Electronic Fund Transfer Act (EFTA) by charging consumers' debit cards without obtaining written authorization. 

• The dismissal came a day after the CFPB had dropped a handful of other enforcement action lawsuits against other companies. 

• Not everyone is off the hook: But the CFPB did decide to continue with another enforcement action, this one against MoneyLion, which was sued back in 2022 by the Bureau for charging members of the military illegally high interest rates. In a filing with the court on Friday, the CFPB indicated that it was planning “continued prosecution” of the lawsuit. 

• One case in limbo: The Bureau also filed a motion seeking a temporary stay in its lawsuit against Reliant Holdings to allow the Acting Director “sufficient time” to review and consider whether to proceed. The defendants have objected to the request for the stay in the proceedings. It was accused of charging consumers significant fees for opening up a credit card and then making it nearly impossible to cancel the agreement. 

Donalds Introduces Bill to Repeal CFPB

Perhaps sensing blood in the water, Rep. Byron Donalds [R-Fla.] has reintroduced a bill that would do away with the Consumer Financial Protection Bureau. Rep. Donalds last week introduced H.R. 1603, “The Repeal CFPB Act”. This is the second time that Donalds has introduced a bill that would eliminate the CFPB. 

• The bill’s language is short and sweet - one sentence that says, “The Consumer Financial Protection Act of 2010 (12 U.S.C. 5481 et seq.) is repealed, and the provisions of law amended or repealed by that Act are restored or revived as if the Act had not been enacted.”

• The anti-CFPB movement: This bill follows another measure that was introduced in the Senate by Sen. Ted Cruz [R-Texas], another vocal critic of the CFPB. That bill was aimed at blocking the CFPB’s funding, which would have rendered it unable to continue operations. The CFPB receives its funding directly from the Federal Reserve and does not have to go through the Congressional appropriations process, which has angered Republicans since the CFPB’s founding. 

• What they said: “From its inception in Dodd-Frank, the CFPB has served as a left-wing tool to stifle domestic economic growth, target political opponents, and prevent the development of competition," said Rep. Donalds, in a statement. "Constructed outside of Congressional oversight and funded directly by the Federal Reserve, the CFPB is the very definition of the corrupt, unelected bureaucracy that has so greatly damaged our nation. It is well past time that Congress abolish the CFPB and unleash American prosperity.”

Judge Grants MTD in FDCPA Case Thanks to SOL

A District Court judge in New York has denied a defendant's motion to dismiss a Fair Debt Collection Practices Act (FDCPA) case over the amount the plaintiff owed, ruling that the plaintiff had sufficiently alleged that the defendants' actions caused concrete harm. The case centers on a dispute regarding inaccurate debt collection notices sent to the plaintiff.

• The background: The plaintiff, who had sought clarification of her debt, received two conflicting collection notices. One notice, sent by one of the defendants, stated that the plaintiff owed $5,534.20, while another, sent by the other, listed the amount as $3,922.20. Both letters suggested that the amounts were "verified" or "validated," yet the plaintiff was confused and distressed by the discrepancies. The confusion led to anxiety, distress, and a drop in the plaintiff’s credit score after the erroneous debt was reported on her credit report.

• The plaintiff filed a lawsuit in February 2024, alleging that these misleading collection notices violated several provisions of the FDCPA, including sections prohibiting false and misleading representations, and unfair practices.

• The ruling: Judge Analisa Torres of the District Court for the Southern District of New York ruled that the plaintiff had standing to pursue her FDCPA claims. In denying the defendant’s motion to dismiss, Judge Torres noted that the plaintiff had suffered concrete harm from the false debt amounts. This included reputational damage from the incorrect debt appearing on her credit report, financial harm from the confusion about the amount owed, and emotional distress.

• The judge further held that the defendant’s debt collection notices misrepresented the amount owed, which would likely mislead the "least sophisticated consumer." The ruling highlighted that FDCPA violations, even if stemming from "technical falsehoods," could be actionable if they mislead consumers in a way that impedes their ability to understand or respond to debt collection efforts.

• The court found that the plaintiff’s allegations, including emotional distress and financial repercussions, were sufficient to establish that the false representations materially impacted her and met the requirements for standing under Article III of the Constitution.

• Carrasquillo v. Nat'l Credit Sys., 24 Civ. 1029 (AT) (S.D.N.Y. Feb. 18, 2025)

WORTH NOTING: Recapping last night’s Oscars … More people are taking the bus these days, instead of flying … If you were going to pick someone who would have two more kids than Nick Cannon, would it be Elon Musk? … Concerns about kids using AI to plagiarize are maybe not as founded as you may have thought … At the same time, Large Language Models have telltale quirks that make them easy to spot … An NFL mock draft for all you football fans … Before there was Zoom and FaceTime, there was Skype. RIP Skype … The best TV shows and movies on Amazon Prime right now.

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