On October 27, two law firms accused by the Consumer Financial Protection Bureau of violating the Consumer Financial Protection Act responded to the CFPB’s allegations that they failed to provide consumers with promised legal representation by accusing the CFPB of “improperly [attempting] to create a new federal common law definition of the practice of law.”   

Last summer, the CFPB filed a complaint in federal court against the Mortgage Law Group and Consumer First Legal Group (collectively referred to herein as “the Firms), alleging that the Firms had violated the Consumer Financial Protection Act, in part, by falsely advertising legal assistance to consumers faced with foreclosure.  Specifically, the CFPB alleged that the Firms “generally do not provide lawyers to provide legal representation for consumers,” explaining in its motion for summary judgment that “[n]on-attorneys performed nearly all of the tasks associated with the [Firms’] mortgage loan modification services, with attorneys’ tasks limited to duplicating the non-legal administrative work that was already performed by non-attorneys.”  The CFPB also claimed that the attorneys’ reviews of work done by non-attorneys “involved no use of legal knowledge or skill” and that “attorneys served as no more than rubber stamps.” 

Responding to the CFPB’s summary judgment motion, the Firms argued that the CFPB was simply attempting to enter an arena into which it is not permitted: “Congress never authorized the CFPB to regulate attorneys, or craft regulations to identify which attorneys are ‘practicing law’ and which are not,” but instead “did just the opposite,” instructing “the CFPB to respect the state law regulation of attorneys,” citing 12 U.S.C. § 5517(e) (providing that the CFPB “may not exercise any supervisory or enforcement authority with respect to an activity engaged in by an attorney as part of the practice of law under the laws of a State in which the attorney is licensed to practice law”).   

The Firms further contend that they do indeed practice law, as “an attorney’s representation of a client in restructuring a secured debt obligation is unquestionably the practice of law,” and whether a task “could be done by a non-attorney” is “not the proper standard to use in determining whether an attorney is practicing law.” 

The Consumer Financial Protection Bureau (CFPB) was created in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) to help protect American consumers by ensuring that federal consumer financial laws are enforced consistently.  The CFPB also has broad authority to conduct investigations and to commence civil actions in federal court against any entity that violates those laws.  

Troutman Sanders will continue to monitor this developing argument.