I’ve come across some additional information as follow up to my recent blog about the CFPB and their appeal process (Who’s Watching the Store) which I believe you’ll find interesting. Thanks to Joe Garrett, of Garrett, McCauley & Co, (www.garrettmcauley.com), and Brad Hargrave, of Medlin & Hardgrave (www.mhlawcorp.com) we have the following clarifications on the CFPB appeals process. From Mr. Garrett’s newsletters:
- 2/24/2105: “Did you know that when you file an appeal with the CFPB, it does not go to the normal court system? The appeal is heard by an administrative judge, someone who works for the CFPB but isn’t a real judge. If you lose your appeal, your only recourse is to then sue the CFPB in federal court and then get your day in court. With a real judge. “
- 3/5/2015: “We asked attorney Brad Hargrave of Medlin & Hargrave in Santa Rosa if we were correct in what we wrote last week about how appeals to the CFPB don’t go to the regular court system. He wrote:
“That’s correct. After an administrative hearing before the Office of Administrative Adjudication (the Bureau’s “court”), the respondent may file a notice of appeal with the Office of Administrative Adjudication. That is, it may file an appeal with the very court that just rendered a decision against it. The respondent then files what is essentially an appellate brief with the Bureau’s Director (Director Cordray), who may allow oral argument, but is under no obligation to do so. The Bureau is also permitted to file a brief. The Director then considers the briefs and renders a final decision.
Judicial review may then be available, although it’s possible, if not likely, that the decision of the Bureau will not be stayed pending that review. Finally, judicial review is likely to be limited to matters involving an abuse of discretion by the hearing officer, or to a claim that the decision was not supported by substantial evidence. In other words, the appealing party isn’t allowed to start over, if you will, in Federal District Court, but rather will be limited to arguments regarding particular issues associated with the decision, and appellate courts tend to give the hearing officer a good deal of deference. So, as a practical matter, an appeal to a “real” court is likely to be a very long shot.
But all is not lost. U.S. Representative Randy Neugebauer (R-Texas) has introduced legislation aimed at creating a 5 member commission to replace the present director of the CFPB (Commission).
Under this proposal, the 5 members would be appointed by the President for a 5-year term with no more than 3 coming from any one political party. Not perfect, but then what is?
The legislation has the support of most banking and financial services organizations. Ironically, this is what was initially proposed and passed by the House, under Democratic sponsorship, when the agency was first being created.
Unfortunately, it didn’t pass the Senate. Other similar proposals are floating around the House and Senate which would create an Independent Inspector General to oversee the activities of the CFPB.
So it seems we may see some changes in the oversight of the CFPB and their enforcement activities. Hopefully, we will at least have a better appeals process.
Do you think CFPB should remain as is, with one Director having complete, almost unfettered authority? Is there a better way?
Regardless, we’ll still need to live by the new rules.