ABA Questions CFPB’s Use of Administrative Adjudications

In a comment letter to the Consumer Financial Protection Bureau today — the second of 12 the association will submit as part of the bureau’s ongoing feedback initiative — the American Bankers Association raised concerns about the bureau’s use of administrative adjudications and offered several recommendations for amending its rules of practice for administrative proceedings.

The association noted that in the past, the bureau’s approach to administrative adjudications has focused on increasing the scope of its authority, rather than on putting in place checks and balances that ensure that its authority is exercised appropriately and consistently with law and due process.

Pointing to the case of CFPB v. PHH — the very first administrative proceeding pursued by the bureau which brought a significant fine against mortgage lender PHH that was later overturned by a federal judge after a lengthy legal battle — ABA questioned whether the bureau should have the authority to deny a company the right to defend against an enforcement action in court.

“[O]nce the bureau decides to circumvent the judicial system, that choice should not deny respondents critical rights they would have in court,” ABA said. “These rights include adequate time for a respondent to defend itself and the ability to conduct robust discovery. If the bureau is not prepared to make administrative proceedings fair, it should not use them at all.”