RSSThe Consumer Financial Protection Bureau announced recently that a $50 million settlement with Sprint, the telecommunications giant, for alleged over-charging on cell phone accounts. The CFPB had initially filed a $105 million lawsuit against Sprint and then negotiated a settlement. However, a federal judge in New York refused to approve that settlement, which took the form of a consent order submitted by the CFBP and Sprint. It marks the first time a CFPB consent order has not been approved, and the bureau’s handling of the matter drew a sharp rebuke from the bench. The memorandum can be found here.
Consent orders are typically negotiated by the parties who then jointly submit them to a court. The court then issues a memorandum approving the terms of the settlement and giving it the force of law. William Pauley, district judge in the U.S. District Court for the Southern District of New York, cited Second Circuit precedent that requires courts to evaluate the settlement and determine if it is fair, reasonable and in the public interest. Judge Pauley wrote that to merely rubber stamp a settlement “would be a dereliction of the court’s duty.”
Judge Pauley found the CFPB’s motion inadequate. “How the bureau believes a judge can evaluate the proposed settlement with a one-sentence joint motion…eludes this Court,” the memorandum stated. No supporting documentation was submitted to the court. Though the original complaint was also handled by Judge Pauley and covered 10 pages, the proposed consent order was apparently much shorter. Unlike all previous consent orders submitted by the CFPB, the Sprint document is not available on the CFPB website. Judge Pauley’s memorandum suggests that the bureau’s effort failed to adhere to the rules of the Second Circuit. Those rules require, in addition to the actual motion, a formal memorandum of law arguing that the proposed settlement conforms to judicial requirements, with supporting affidavits and exhibits as needed. The judge’s memorandum refused to approve the settlement and invited both parties to submit a new one more in keeping with the court’s expectations.
“In view of the importance of this case, there is need for consumers, Sprint shareholders and this court” to get more information, the ruling stated. The lack of information was, according to Judge Pauley, “especially ironic, given the bureau’s core mission” which he then quoted from the CFPB website as being to “give consumers the information they need to understand the terms of their agreements.”
