District Court Dismisses CFPB Lawsuit Against Payment Processors, Cites “Blatant Disregard” for Discovery Order
On August 25, a federal judge in the U.S. District Court for the Northern District of Georgia filed an order dismissing claims brought by the CFPB against four payment processors for allegedly engaging in an illegal robocall phantom debt collection operation involving certain payment processors and a telephone broadcast service provider (defendants). (See previous InfoBytes coverage here.) According to a complaint filed in 2015, the defendants “knew, or should have known” that the debt collectors were contacting millions of consumers in an attempt to collect debt that consumers did not owe or that the collectors were not authorized to collect by using threats, intimidation, and deceptive techniques in violation of the Consumer Financial Protection Act and the Fair Debt Collection Practices Act.
According to the order, however, the CFPB displayed a “blatant disregard” for the court’s instructions when asked repeatedly to identify the factual bases for its claims, and willfully failed to present a knowledgeable 30(b)(6) witness during depositions. As examples of “willful disregard,” the court noted that the CFPB’s approach was to first “bury the Defendants in so much information that [they] cannot possibly identify, with any reasonable particularity, what supports the CFPB’s claims,” and second, to “assert privilege objections to questions that the Court … repeatedly ordered to be answered.” The court also indicated that Bureau witnesses relied on “memory aids”—which the court characterized as “scripts”—to provide answers to the defendants’ questions and were unable to testify beyond what was stated on the memory aids. This behavior made the court “not optimistic that reopening the depositions would be fruitful.” As a result, the court dismissed the defendants from the action, granting sanctions under Rule 37, which permits “a district court [to] impose sanctions upon a party for failure to comply with a discovery order,” which may include striking pleadings in whole or in part.