Last month, the Consumer Financial Protection Bureau traded briefs in federal court with Integrity Advance regarding Integrity’s motion to dismiss a CFPB enforcement action alleging violations of the Unfair, Deceptive or Abusive Acts and Practices clause of the Real Estate Settlement Procedures Act. Integrity argued that the action against them was barred by the statute of limitations, but the CFPB claims that the three-year time frame for general actions under the Consumer Financial Protection Act does not apply. The court’s decision will have a tremendous impact on the scope of the CFPB’s power to punish UDAAP violations.
The original administrative action alleged deception in Integrity’s small-dollar loan applications and contracts. The complaint filed by the CFPB references events “from May 15, 2008 through December 2012,” but the complaint itself was filed in November of last year. The plain language of the CFPA states that “except as otherwise permitted by law or equity, no action may be brought under this title more than three years after the date of discovery of the violation to which an action relates.” Citing this language, Integrity filed a motion to dismiss.
However, the CFPB claims that UDAAP violations are governed by the “except as otherwise permitted” language when they are enforced in an administrative proceeding. The bureau argued that only federal lawsuits are governed by the statute of limitations, and that administrative actions are not “actions” as understood by the law.
Integrity countered that the language of the CPFA speaks only of “actions” and draws no distinctions between those in court and those that are administrative. Indeed, if “actions” are to be read only as complaints filed in federal court, Integrity argued, the CFPB has no jurisdiction whatsoever since all activities of the bureau are referred to as “actions.” Integrity noted that the UDAAP violations currently leveled against the lender would themselves be null and void under the CFPB’s narrow interpretation of “action.” Thus, according to Integrity’s response, either the statute of limitations applies to administrative actions, or the CFPB has no authority “to pursue a UDAAP claim or recover costs,” but the CFPB “cannot have it both ways.”
If the CFPB’s rationale on the statute of limitations stands, it will add even more leeway for the CFPB to exercise its already wide UDAAP authority. This, in turn, would create more uncertainty for entities attempting to manage UDAAP compliance risks. On the other hand, a decision in favor of Integrity would clearly limit the scope of CFPB enforcement actions to recent instances.