No question about it – the CFPB will bully you when they can. This time David fought back and defeated Goliath.
In 2013 the Consumer Financial Protection Bureau (CFPB) sued Borders and Borders PLC, a small family-owned law firm located in Louisville, KY. The CFPB alleged that the firm and principals Harry Borders, John Borders, Jr. and J. David Borders accepted kickbacks in exchange for referrals of real-estate closing services.
Most companies cannot afford to pay the attorneys to fight the federal government for years in federal court. These guys are attorneys., but they still paid outside counsel to represent them in this battle. They persevered and won.
The CFPB got greedy. The law firms and realtors had agreed to dismantle the affiliated business arrangements, but the CFPB wanted a consent decree under which the defendants agreed to pay damages. The defendants would not agree to the damages. The CFPB filed suit and lost.
This is one of the few cases the CFPB has lost on the merits at the federal trial court level. The CFPB is very quick to publish blog articles on their victories in court. They have been very quiet about this setback.
The case isn’t necessarily over. There is a chance the CFPB may file an appeal.
What does this mean for others? Properly established and operated affiliated business arrangements are eligible for the statutory safe harbor available under the Real Estate Settlement Procedures Act (RESPA). The CFPB does not approve of the arrangements used by Borders and Borders. Instead of working through Congress to change the law, the CFPB engaged in their common tactic of Regulation-by-Enforcement. Will the CFPB pursue a revision to the law or will they allow affiliated business arrangements to continue as outlined in this case?
A copy of the original complaint is available at https://files.consumerfinance.gov/f/201310_cfpb_complaint_borders.pdf