To date, the Consumer Financial Protection Bureau has had only two contested trials. The outcome of its most recent courtroom match-up left the bureau with a meager victory that fell far short of the decisive one it had hoped for.
In the case, CFPB v. Nationwide Biweekly Administration, Inc., the defendant ran a program, called Interest Minimizer, in which mortgage borrowers remitted half of their monthly mortgage payment every two weeks. That timing resulted in the equivalent of one extra monthly payment per year, which in theory would reduce the borrower’s interest charges over time. The CFPB claimed that Nationwide exaggerated how much money people would save, misled borrowers about the fees it imposed, and deceptively advertised its services. In 2015, the bureau sued Nationwide in California federal court. After a seven-day bench trial (in which the judge, not a jury, decided the case), the bureau demanded $77 million in restitution, as well as injunctive relief that would permanently end the Interest Minimizer program.
But, in its final judgment, the court imposed a civil penalty of only a $7 million and directed the parties to confer about possible forms of injunctive relief that would allow Nationwide to resume the Interest Minimizer program but require it to correct certain misleading aspects of it.
This decision offers at least two valuable lessons. First, the CFPB is fond of wielding is authority to regulate allegedly unfair, deceptive, or abusive acts and practices. The standards governing that authority are amorphous, so companies like Nationwide that try to stay close to the line of illegality without crossing it are bound to fail at least in some respects. The safer practice is to design your business operations to be clearly lawful. Second, the CFPB normally faces no meaningful checks or balances. So its litigation demands can be exorbitant and unrealistic. Thus, companies should not rule out fighting the bureau when it overreaches.