504 F.Supp.3d 39
D.R.I.2020Background
- CFPB issued a Civil Investigative Demand to Citizens Bank on April 22, 2016, then filed suit on Jan. 30, 2020 alleging TILA and CFPA violations arising from conduct ending in 2015–2016.
- The parties signed tolling agreements pausing statutes of limitation from Feb. 23, 2017 through Jan. 31, 2020.
- Citizens moved to dismiss, arguing claims are time‑barred, Seila Law’s removal holding divests CFPB authority (so suit and tolling were invalid), CFPB funding is unconstitutional, and several pleading defects exist.
- In Seila Law (140 S. Ct. 2183), the Supreme Court held the CFPB Director’s for‑cause removal protection unconstitutional but severable; it left open whether post‑severance ratification cures prior actions.
- Director Kraninger ratified the CFPB’s enforcement action after Seila Law; the district court considered whether that ratification and the pre‑Seila tolling agreements were valid and whether the suit survives dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicable statute of limitations for CFPB’s TILA‑based suit | CFPB: its enforcement is under 12 U.S.C. §1607/Subtitle E, so the 3‑year discovery rule applies | Citizens: TILA §1640’s 1‑year private action limitation governs | Held: §1607/Subtitle E governs CFPB civil enforcement; 3‑year discovery period applies, so suit timely given tolling agreements |
| Effect of Seila Law on pending suit (ratification) | CFPB: Seila Law severed removal protection; Director Kraninger’s post‑Seila ratification cures any defect | Citizens: Structural defect prevents valid original action; ratification inadequate; Article III/standing problems | Held: Ratification by a President‑accountable Director cured the removal‑based infirmity; dismissal not required; ratification was reasonable and sufficient |
| Validity of pre‑Seila tolling agreements | CFPB: Bureau retained authority to enter tolling agreements despite removal provision; tolling agreements valid | Citizens: Tolling agreements entered under an unconstitutionally insulated Director are void and cannot be ratified later | Held: Tolling agreements were not so closely imputed to the Director as to be void; they remain valid and preserved the filing date |
| CFPB funding mechanism (Appropriations Clause) | CFPB: funding from Fed. Reserve transfers is permissible; Congress authorized structure | Citizens: Funding outside annual appropriations violates Appropriations Clause | Held: CFPB’s funding structure does not violate the Appropriations Clause; challenge rejected |
| Pleading sufficiency re: Regulation Z / staff commentary and requested relief | CFPB: alleges automatic denials when consumers refused "Fraud Affidavits," violating staff commentary; seeks equitable and monetary relief | Citizens: CFPB improperly relies on nonbinding staff commentary; factual allegations insufficient; some remedies unavailable or moot | Held: Staff commentary is binding absent demonstrable irrationality; facts plausibly allege violations and relief claims survive pleading-stage attack |
Key Cases Cited
- Seila Law LLC v. CFPB, 140 S. Ct. 2183 (U.S. 2020) (holding CFPB Director’s for‑cause removal protection unconstitutional but severable)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading must state a plausible claim)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility standard for dismissal)
- Ford Motor Credit Co. v. Milhollin, 444 U.S. 555 (U.S. 1980) (staff commentary construing TILA/Reg Z is dispositive unless demonstrably irrational)
- Advanced Disposal Servs. E., Inc. v. NLRB, 820 F.3d 592 (3d Cir. 2016) (requirements for effective ratification of prior agency acts)
- FEC v. NRA Political Victory Fund, 513 U.S. 88 (U.S. 1994) (timing and authority limits on ratification)
- CFPB v. Gordon, 819 F.3d 1179 (9th Cir. 2016) (post‑confirmation ratification cured prior Appointments Clause defect)
- Legi‑Tech, Inc. v. FEC, 75 F.3d 704 (D.C. Cir. 1996) (reconstituted agency may ratify predecessor’s actions)
- Collins v. Mnuchin, 938 F.3d 553 (5th Cir. 2019) (discussing remedy for removal‑protection infirmity)