In January, we wrote about the CFPB’s latest lawsuit predicating an alleged federal UDAAP violation on the violation of a state law. The case involves claims against a mortgage lender who allegedly employed individuals working as loan originators, but who were not licensed as loan originators as required by state law. We noted that the CFPB claimed this conduct not only violated Regulation Z—which requires loan originators to be licensed in accordance with state law—but was also deceptive. The deception claim only alleged that the misrepresentation that the loan originators were licensed “might have” impacted consumer decisionmaking. As we previously noted, however, “a representation is only material if it is ‘likely’ to affect a consumer’s behavior—that a consumer ‘might have acted differently’ is not enough.”
The CFPB has now apparently recognized the deficiency in its pleading and recently filed an amended complaint in the case. The amended complaint adds no new claims; its primary purpose appears to be shoring up the deception claim by striking “might have” and replacing it with “would likely have,” so that the CFPB’s allegation now reads: “[The Lender’s] misleading misrepresentations, omissions, or practices were material because a reasonable consumer would likely have acted differently, including by taking their business elsewhere, saving time and money, if informed of the truth.” (emphasis added) To drive the point home, the CFPB has also added a new paragraph to the complaint alleging that “[the Lender’s] express misrepresentations were material to consumers’ decision-making with respect to choosing their mortgage originator, because they presumptively affected the consumer’s conduct or decision with regard to their mortgage originator.” (emphasis added) Here, the CFPB is relying on the principle that express misrepresentations are presumed to be material. These edits appears to cure the prior pleading deficiency, but it will be interesting to see if the defendant or the court pick up on the CFPB’s prior formulation to argue that the Complaint does not allege any facts demonstrating such likely consumer reliance. In any event, the CFPB appears firmly committed to alleging federal UDAAP claims whenever it believes it can do so, regardless of whether other more clearly applicable claims also apply to the conduct at issue.