(Source: JD Supra) – Since it was filed in a California federal court in July 2012, we have been following CFPB v. Chance Edward Gordon, a case in which the CFPB alleged that an attorney duped consumers by falsely promising loan modifications in exchange for advance fees and, in reality, did little or nothing to help consumers. The CFPB charged the defendant with violations of the Consumer Financial Protection Act and Regulation O, the Mortgage Assistance Relief Services Rule.
As part of his affirmative defenses to the CFPB’s complaint, the defendant included a challenge to President Obama’s recess appointment of Director Cordray. In his summary judgment motion, the defendant asserted that, based on the reasoning of the D.C. Circuit’s decision in NLRB v. Noel Canning, Mr. Cordray was not validly appointed as CFPB Director.
He argued that in the absence of a validly-appointed Director, the CFPB had no authority over non-banks and the CFPB’s action against him was therefore rendered invalid. The U.S. Supreme Court subsequently affirmed the D.C. Circuit’s ruling that the NLRB appointments at issue in Canning were invalid but did so on different grounds.
Alternatively, the defendant argued that he was not a “covered person” within the meaning of the Dodd-Frank Act because he did not provide a “consumer financial product or service” but instead provided “custom legal products.” The defendant also asserted that he did not provide “mortgage assistance relief services” within the meaning of Regulation O because the loan modification services he offered were provided for no compensation. According to the defendant, fees were only charged for pre-litigation, custom legal products.