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From Banking and Finance Law Daily, December 14, 2017

CFPB suit against attorney involved in structured settlement sales reinstated

By Richard A. Roth, J.D.

An amended complaint offered by the Consumer Financial Protection Bureau has convinced a U.S. District Judge that the Bureau might be able to prove that an attorney was liable for unfair, deceptive, or abusive acts or practices when advising consumers on the sale of their structured settlements. The CFPB has added an important allegation to its case that, if proved, would deprive the attorney of the practice-of-law exception from the Bureau’s enforcement authority (CFPB v. Access Funding, LLC , Dec. 13, 2017, Hollander, E.).

The CFPB claimed that the structured settlement factoring business of Access Funding, LLC, and affiliated companies used unfair, deceptive, or abusive acts or practices to induce consumers to sell their settlements for lump-sum payments. The Bureau also charged that the attorney, when acting as the "independent professional adviser" required by state law when structured settlements are being sold, violated the Dodd-Frank Act UDAAP ban (see Banking and Finance Law Daily, Nov. 22, 2016).

Practice-of-law exclusion. The Dodd-Frank Act says that attorneys who are engaged in the practice of law are not covered persons who are subject to the Bureau’s enforcement authority. In an earlier opinion, a different judge concluded that the exception protected the attorney from the suit.

The individual was licensed to practice law, the judge pointed out. Also, when acting as the independent professional advisor, he was expected to tell consumers about the legal implications of a sale. That meant he was an attorney practicing law. The judge added that the Bureau’s complaints about the quality of the attorney’s advice were irrelevant because "Bad legal advice is still legal advice" (see Banking and Finance Law Daily, Sept. 14, 2017).

Added allegation. In its request to file an amended complaint, after the suit was reassigned to a different judge, the CFPB added three allegations:

  1. The consumers never intended to form an attorney-client relationship.
  2. The consumers were not told, and did not know, the individual was an attorney.
  3. There were no documents that created an attorney-client relationship.

The first and third claims added nothing to the analysis, the judge said; however, the second was dispositive.

"It is logically impossible for a ‘client’ to form an attorney-client relationship with someone she does not know is an ‘attorney’," the judge said. If the CFPB can prove that allegation, it can nullify the practice-of-law exclusion. As a result, the Bureau was permitted to file the amended complaint and can pursue its suit against the attorney.

The case is No. ELH-16-03759.

Attorneys: Christina S. Coll (Christina S. Coll, Attorney at Law) for the CFPB. Andrew J. Chiang (O'Hagan Meyer, PLLC) for Access Funding, LLC.

Companies: Access Funding, LLC; Access Holding, LLC; Reliance Funding, LLC

MainStory: TopStory DoddFrankAct EnforcementActions MarylandNews UDAAP

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