Federal Judge Awards Sanctions Against the CFPB


On August 25, 2017, Judge Story, United States District Judge for the Northern District of Georgia, ordered sanctions against the Consumer Financial Protection Bureau (CFPB) and dismissed five defendants from a matter filed against various debt collectors, 1:15-CV-859-RWS, ECF No. 436.

In its complaint, the CFPB alleges that several individuals (debt collectors)  created limited liability companies in Georgia and New York to perpetrate a debt-collection scheme targeting millions of consumers.  The CFPB claims that the debt collectors then used a telecommunications provider to broadcast millions of threatening and false statements to consumers in telephone calls and messages.  The CFPB further asserts that the debt collectors used four payment processors to withdraw funds from consumers’ accounts.  Based on this factual background, the CFPB claims that the telecommunications provider and the payment processors violated the Consumer Financial Protection Act (CFPA), 12 U.S.C. §§ 5531, 5536(a) by providing substantial assistance to the debt collectors’ unfair or deceptive conduct and by engaging in unfair acts or practices.

The payment processors and the telecommunications provider defendants brought motions for sanctions under Rule 11 of the Federal Rules of Civil Procedure (which was denied) and under Rule 37 of the Federal Rules of Civil Procedure.  According to the motions, the CFPB initially refused to sit for a 30(b)(6) deposition.  The Court subsequently ordered the CFPB to sit for a deposition, entering a protective order that allowed the defendants to inquire into “factual matters.”  ECF No. 436 at 4.; see also ECF No. 316.

At the CFPB’s first noticed 30(b)(6) deposition, the witness was then instructed not to answer questions about factual matters on the basis of privilege.  The issue was again brought before the Court, which ordered that “factual support for contentions is an area of inquiry that’s appropriate,” and permitted the deposition to proceed with questioning at to the facts relating to CFPB’s claim that debt collectors knowingly committed certain unlawful conduct, the factual bases and sources of facts for each and every allegation in the complaint, and any and all facts obtained by the CFPB through its investigation and/or that were pleaded in its​ complaint.  ECF No. 436 at 5-7; see also Doc. No. 397-5 at 27:24-25.  The CFPB continued to sit for several other depositions and continued to refuse to answer certain questions, asserting privilege.

Based on the CFPB’s continued refusal to answer questions regarding factual matters underpinning the CFPB’s claims against them, the payment processors and the telecommunications providers brought the Rule 37 motions.  In determining sanctions were appropriate, the Court first found that the CFPB used extensive improper “memory aids” in its depositions, which the Court “characterized as “scripts,” including a forty-five minute scripted response the witness read into the record.  ECF No. 436 at 13.  The Court then found the CFPB asserted improper work-product objections and instructed the witness to answer on topics the Court had previously found were appropriate factual questions.  Id. at 17-20.

In awarding sanctions, the Court found the “CFPB willfully violated the Court’s repeated instructions to identify for Defendants the factual bases for its claims and that, in each deposition, it willfully failed to present a knowledgeable 30(b)(6) witness.”  Id. at 21.  As the Court was “not optimistic that reopening the deposition would be fruitful,” the Court instead granted the motion for sanctions under Rule 37, and dismissed the payment processors and the telecommunications providers after “having stricken all the claims against them.”  Id. at 22.


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