The CFPB director’s dominance over adjudication must end

On behalf of CEI, I submitted a new comment to the Consumer Financial Protection Bureau (CFPB) calling on the Bureau to rescind one of its director’s many powers over adjudication. This rescission would restore greater procedural fairness in the CFPB’s administrative law court (ALC).

Under Acting Director Russ Vought, the agency is undergoing a much-needed makeover and internal restructuring. This has included an indefinite freeze on all CFPB enforcement actions, with attempts to vacate and even repay unjust penalties imposed. A big part of reforming these unjust enforcement actions would be removing the director’s iron grip on the agency’s adjudications.

Adjudication is the process by which certain agencies can resolve legal disputes in-house without appearing before a federal court. Many agencies, like CFPB, use their system of adjudication exclusively for imposing monetary penalties on regulated parties. My latest comment responds to a welcome effort by Acting Director Vought to rewrite those rules.

The proposed rule seeks to rescind a 2022 amendment empowering then-Director Rohit Chopra, rather than the agency’s administrative law judge (ALJ), to review all dispositive motions. Dispositive motions are those that allow for a dispute to be resolved before it reaches a hearing (equivalent to a trial).

CFPB dispositive motions fall into two categories: summary disposition, which resolve cases when the law is clearly understood and there is no dissension over the facts, and dismissals, which reject the lawsuit outright.

As I explain in my comment, this amendment is unfair on many levels. For starters, the original rules for practice held that only the ALJ was authorized to review dispositive motions. Every agency except for the Federal Trade Commission (FTC) requires their ALJ to review all dispositive motions. The CFPB adopted its amendment in order mimic the FTC’s unfair setup that enables its commissioners to decide all dispositive motions.

The CFPB’s rule also sets up the director as the de jure gatekeeper over every legal dispute on the Bureau’s docket. This is because the director already reviews and signs off on all settled cases by issuing consent orders. According to my count, these orders comprise 95 percent of all cases from CFPB since its inception in 2011, meaning the director influences the outcome of virtually every case. The few remaining cases are those targeted by the director’s authority over dispositive motions, allowing the director to approve summary judgments proposed by the enforcement staff.

Perhaps more controversial is that the director has a strong incentive to reject motions to dismiss the case filed by the private party. Someone may wonder, “why did the Bureau’s director reach down into my case to deny my motion to dismiss?” The director can simply cherry-pick private parties s/he doesn’t like and ensure the enforcement team’s penalties are advanced against them in-house.

The director has incentive to deny most or all motions to dismiss his own agency’s charges because he was the one who approved their initiation in the first place. This stacks the deck to ensure that the agency can punish you either through a hearing or extracted penalties in settlement.

Additionally, the Administrative Procedure Act (APA) only provides that the ALJ or “hearing officer” can issue all recommended decisions to the agency. Representing the agency, the CFPB’s director already reserves the final say on an ALJ’s recommended decision. Yet, under the 2022 amendment, he also serves as the initial decider of dispositive motions, undermining the APA’s order of operations. In this way, the director is the only federal officer who wields the initial and final say on all adjudicated matters. This is too much power centralized into the hands of one person.

Moving forward, Acting Director Vought should rescind the Bureau’s unjust amendment and restore procedural fairness in adjudication. We cannot have a director who already wields absolute power over rulemaking and enforcement also be the supreme judge in his own eyes. Taking away this power is the first step in the right direction toward reforming the CFPB’s problematic system of adjudication.