As part of the House Committee on Financial Services’ March 7 Hearing, “Putting Consumers First? A Semi-Annual Review of the Consumer Financial Protection Bureau,” Scott S. Weltman, Managing Shareholder of Weltman, Weinberg & Reis Co., LPA (Weltman), was invited to testify as to the firm’s experience with the Consumer Financial Protection Bureau (CFPB).
Weltman was the subject of a Civil Investigative Demand (CID) process with the CFPB beginning in September 2014. Following its investigation, the CFPB attempted to pressure the firm into signing a Consent Order. When Weltman refused, the CFPB filed suit against the firm in April 2017. Weltman engaged Jones Day to defend the lawsuit, which included a four-day bench trial in May 2018. After 15 months of litigation, Weltman prevailed in the suit. Additional details can be found here.
The focus of Mr. Weltman’s testimony at the March 7 hearing was to highlight the consequences of what many others in the industry have identified as significant issues with the CFPB’s single-director structure, limitless financial resources, and lack of Congressional oversight. As Ranking Member McHenry remarked in his opening statement, “Many of us have expressed serious reservations over the establishment of the CFPB. . . . Our concerns were driven by the fear that Congress was creating one of the most powerful and unaccountable bureaucracies ever. Unfortunately, we were right.”
In Weltman’s case, despite the proven baselessness of the CFPB’s case against the firm and the complete absence of any consumer harm found, the CFPB was empowered to aggressively pursue Weltman for nearly four years. The toll of its investigation and subsequent lawsuit on the firm included $2 million in attorneys’ fees, lost revenue, and more than 100 Weltman employees losing their jobs.
Several members of the House were sympathetic toward Weltman’s experience and expressed concern at the CFPB’s history of regulation via enforcement, and at former CFPB Director Richard Cordray’s role in the case against Weltman.
Mr. Weltman highlighted the irony of the fact that the firm had been hired in 2009 – and re-hired in 2010 – by then-Ohio Attorney General Richard Cordray to collect debts on behalf of the State of Ohio. This included a significant vetting process including Cordray’s direct approval of Weltman’s collection letters. Once he became Director of the CFPB, however, Mr. Cordray approved a lawsuit against Weltman claiming that virtually identical letters violated the law.
In hearing this testimony, Representative Bill Huizenga of Michigan remarked that he was, “fascinated by this notion that an attorney general would act in one way at the state level, and then come to Washington D.C. with a bright new shiny object called the CFPB, and act in a completely different way.”
In his testimony, and in responding to the questions he received from members of the Committee, Mr. Weltman echoed the debt collection industry’s longstanding call for the CPFB to legislate via rulemaking, as it was empowered to do nearly eight years ago, instead of via enforcement actions. Representative Anthony Gonzalez of Ohio summarized the Hearing neatly in his remarks, saying, “I believe the lesson we’ve learned today, quite frankly, is that neither side is really happy . . . and that we need structural reforms. I think the case for structural reform is actually very clear, and that should be a bi-partisan initiative.”
A full recording of the Hearing can be found on the House Committee on Financial Services’ website; Mr. Weltman’s testimony, specifically, can be viewed here. Additionally, a full transcript of Mr. Weltman’s written statement of testimony, with supporting documents, is available here.