On November 1, several debt collection trade organizations sued the CFPB in the U.S. District Court for the District of Columbia. In the complaint, the plaintiffs alleged that the CFPB violated the APA when it issued an advisory opinion on October 1 on collecting medical debts (covered by InfoBytes here). The plaintiffs claimed the advisory opinion interpreted the FDCPA to establish new rules without public input, as allegedly required by the APA.

The plaintiffs claimed the CFPB implemented new rules under the FDCPA, such as: (i) a requirement for debt collectors to review account-level documents before sending a validation notice; (ii) a requirement for debt collectors to apply a “reasonableness” standard for determining the amount to be collected, rather than relying on collection amounts stated by the original creditor; (iii) a new definition of debt in “default”; and (iv) a mandate for medical procedure audits to ensure billed procedures were actually performed. The plaintiffs argued these rules imposed new obligations on debt collectors and the healthcare billing industry.

In addition to claiming that the CFPB failed to follow the APA’s rulemaking procedures in adopting the advisory opinion, the plaintiffs further contended that the advisory opinion exceeded the CFPB’s statutory authority, as Congress did not delegate regulatory power over healthcare to the CFPB. The plaintiffs asserted the CFPB’s jurisdiction was limited to financial products and services, and the advisory opinion extended the agency’s reach illegally into the healthcare sector. The plaintiffs also argued that the advisory opinion “should be set aside” because the CFPB was funded unconstitutionally due to the Fed’s lack of profits since September 2022. This was not the first time litigants have argued that the CFPB was unconstitutional following the decision in CFPB v. CFSA (here). To date, courts have continued to agree that the CFPB’s funding structure is legal (here).

Overall, the plaintiffs asserted five counts against the CFPB in violation of the APA: failure to engage in notice-and-comment rulemaking; arbitrary and capricious action; failure to observe certain procedures required by law; exceeding statutory jurisdiction, authority, or limitations; and an unconstitutional funding structure. The complaint sought an order vacating and setting aside the advisory opinion nationwide, along with other relief.