The Consumer Financial Protection Bureau (CFPB) was formed by the Dodd-Frank Act. The main intent of the CFPB was to help consumers that were having issues with Banks, Lenders and other Financial Institutions. CFPB jurisdiction includes banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors and other financial companies operating in the United States.
By extension, it has also taken action against law firms that represent clients in these industries. In particular law firms that are engaged in collection of debt. The conundrum for law firms is that when the CFPB accuses a law firm of misdeeds, there is not insurance coverage. Attorney Malpractice polices generally have exclusions for fines and sanctions levied against a law firm. I have had conversations with a number of law firms that are concerned about the lack of insurance protection, as a CFPB action could be the one thing that puts a law firm out of business, especially sense they believe that likely would have done nothing wrong. This has left many law firms in the precarious position of having to accept a consent order against them that could be in the Millions of dollars or fight the consent order and possibly lose.
Without any insurance protection, most law firms have accepted the consent order and the penalties that go with it rather than risk losing and possibly bankrupting the law firm. Because in addition to no indemnity payment, there is also no attorney malpractice coverage for defense costs.
The Ohio based law firm of Weltman Weinberg & Reis (WWR) did not accede to the consent order. CFPB has now filed suit against WWR.
Only time will tell how fighting CFPB works out for WWR. Law Firms that are representing and/or performing services for any client or service that falls within the purview of the CFPB, needs to be aware of the consequences if the CFPB feels that a firm has violated the law.