• CFPB Precluded From Bringing Abusive Claims Against Attorney
  • November 9, 2017 | Authors: Michele Bresnick Walsh; Robert A. Gaumont; Marjorie A. Corwin; Christopher R. Rahl; Andrew Keith Wichmann
  • Law Firm: Gordon Feinblatt LLC - Baltimore Office
  • On September 13, 2017, the United States District Court for the District of Maryland dismissed claims brought by the Consumer Financial Protection Bureau (CFPB) against an attorney involved with a company in the business of “structured settlement factoring.” Structured settlement factoring involves buying an asset (usually a settlement involving future payments in a personal injury lawsuit) for a discounted upfront payment. The company at issue allegedly targeted settlements in lead paint cases and provided cash advances which it would then treat as an “extension of credit” that consumers were required to repay if they did not complete the underlying transaction. Maryland is one of the majority of jurisdictions to require court approval and review by an independent professional advisor (IPA) before allowing a structured settlement factoring transaction to occur. In this case, the CFPB alleged that the factoring company selected the same attorney to serve as the IPA for most transactions and that the advice provided by this attorney was perfunctory (but the CFPB’s complaint did characterize the advice provided as legal in nature). After the parties filed motions to dismiss, the court denied the motion filed by the company, finding that the CFPB had adequately plead claims for abusive practices under the Dodd-Frank Act where the company had provided cash advances structured as “extensions of credit” to be repaid by consumers that allegedly suffered from lead paint-related cognitive disabilities. The court, however, granted the motion to dismiss filed by the IPA finding that, as an attorney, the IPA was protected by the “practice of law” exclusion to CFPB jurisdiction under 12 U.S.C. § 5517(e)(1), because the IPA gave consumers legal advice. On October 3, 2017, the CFPB filed a motion for leave to file an amended complaint that included no allegations of the IPA providing legal advice and that emphasized the cursory nature of the professional advice being provided. We will continue to monitor this important case. Please contact Robert Gaumont for more information related to this topic.