We have reported for years on the Herculean strength of the CFPB, laying waste to all foes – real or perceived – that it encounters. Well, the Bureau suffered a comeuppance of sorts last month in the Northern District of Georgia from the hands of four payment processors.

The CFPB had sued the four and a telemarketing firm for their alleged participation in a robocall “phantom debt collection” operation. The Bureau had alleged that the four payment processors had joined with telemarketer Global Connect to use automated telephone calls to consumers in a deceptive manner, including threats to collect debt that sometimes was not even owed. The CFPB joined the payment processors and telemarketer into the law suit against Universal Debt Solutions, LLC, alleging that the debt collection scheme could not have been possible without their involvement.

Basically, the CFPB argued that the payment processors were guilty by association for ignoring “red flags” that should have alerted them to the illegal nature of the debt collection scheme.

Instead of rolling over, the service providers fought back in court. They propounded discovery of the CFPB that the Bureau failed to produce. That is, in depositions, the CFPB failed to provide witnesses with any information relevant to the CFPB's lawsuit, after repeated instructions from the trial court to do so. The CFPB's witnesses relied upon “memory aids” that were general in nature and not responsive to the Defendant service providers' direct deposition questions.

Based upon the CFPB's “blatant disregard” for the court's specific instructions, the court invoked the ultimate sanction in this case, striking the pleadings in whole, finding that the Bureau acted willfully or in bad-faith in its failure to obey the court's discovery order.

As a consequence, the claims against the service providers were dismissed.