On August 25, 2017, the United States District Court for the Northern District of Georgia entered an order granting multiple Defendants’ consolidated motion for sanctions against the Consumer Financial Protection Bureau. Defendants’ Rule 37 motion alleged the CFPB failed to produce a knowledgeable deposition witness and also failed to follow the Court’s various orders to have its witness answer inquiries regarding the CFPB’s factual basis for its claims. After a comprehensive review of the CFPB’s apparent efforts to avoid the Defendants’ depositions, District Court Judge Richard Story struck all claims brought by the CFPB against the defendants who filed the motion for sanctions.

The CFPB filed the action in March of 2015 against numerous individuals, debt collectors, and payment processors for alleged violations of the Consumer Financial Protection Act and Fair Debt Collection Practices Act arising from Defendants’ actions in connection with an alleged nation-wide debt collection scheme. The CFPB alleged the Defendant debt collectors used automated telephone broadcasting services and individual collectors to threaten, intimidate, and harass millions of consumers into paying debts the consumers did not owe. The CFPB claimed the Defendant payment processors helped facilitate payment from the defrauded consumers to the debt collectors with knowledge of the debt collectors’ unlawful activity. 

During discovery, Defendants served multiple Rule 30(b)(6) deposition notices on the CFPB in an effort to discover the factual basis for the claims. The CFPB raised numerous objections to the deposition notices; however, the Court ordered the CFPB to provide a witness who could answer questions regarding the CFPB’s factual basis for its claims. Depositions took place in April 2017. During those depositions, the CFPB’s witness reportedly read from a lengthy, repetitive, and sometimes unresponsive, script; including one instance where the witness read from the script for over an hour, virtually uninterrupted. In addition, the CFPB’s counsel repeatedly objected to Defendants’ questions on privilege grounds despite the Court’s previous directive that such questions were appropriate. The CFPB continued this pattern of behavior even after admonishment from the Court following the first deposition.

Defendants moved for sanctions under Rule 37(b) and (d) and asked the Court to dismiss the CFPB’s claims. Relying on portions of the deposition transcripts as well as prior verbal orders of the Court, Judge Story found the CFPB had “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.” The Court declined to re-open the depositions because doing so was, in the Court’s view, futile. The Court then struck counts eight through eleven of the Complaint and dismissed Defendants Frontline Processing Corp.; Global Payments, Inc.; Pathfinder Payment Solutions, Inc.; Electronic Merchant Systems, Inc.; and Global Connect, LLC from the action.

The Court’s decision is significant in that it reflects a federal Court’s willingness to hold the CFPB to the same standards as other litigants. Although the decision provides little support with regards to any substantive legal interpretation of the CFPA and FDCPA, the Court’s willingness to require the CFPB to provide a knowledgeable deposition witness to testify regarding the CFPB’s factual basis for its claims is a potentially powerful weapon for debt collectors to use in CFPB-originated actions.

The case is Consumer Financial Protection Bureau v. Universal Debt Solutions, LLC, et al., Civil Action No. 1:15-cv-859-RWS (N.D. Ga.).