What Can the Financial Services Industry Expect Following Justice Kavanaugh’s Confirmation to the Supreme Court?
Author: Dawn N. William
After a highly publicized and controversial confirmation process, the senate voted to approve Brett Kavanaugh’s nomination to the Supreme Court this past Saturday, October 6, 2018. Kavanaugh was sworn in later that day and began hearing cases on Tuesday, October 9, 2018.
It goes without saying that Justice Kavanaugh is a conservative judge and is expected to lean to the right. It also goes without saying that Justice Kavanaugh’s appointment pushes the Supreme Court to the right with a 5-4 ratio. But what does Justice Kavanaugh’s appointment mean for the financial services industry?
While there is no guarantee as to how Justice Kavanaugh will rule in cases before the Supreme Court, his history as a judge and statements that he made during the confirmation process provide some insight. We know from Justice Kavanaugh’s history as a judge that he is against over-regulation of the financial services industry–and, specifically, over-regulation by the Consumer Financial Protection Bureau (the “CFPB”). Justice Kavanaugh’s strongly worded opinion in PHH Corp. v. Consumer Financial Protection Bureau, 839 F. 3d 1 (D.C. Cir. 2016), arguably one of the judicial opinions most critical of the CFPB’s overreach, demonstrates his views on the limits of effective and acceptable regulation of the financial services industry. In PHH Corp., the D.C. Circuit Court lambasted the structure of the CFPB and held that its single-director structure was unconstitutional. As support for the holding, Justice Kavanaugh wrote that the “Director of the CFPB can be considered even more powerful than the President” and that “[a]s an independent agency with just a single Director, the CFPB represents a sharp break from historical practice, lacks the critical internal check on arbitrary decision making, and poses a far greater threat to individual liberty than does a multi-member independent agency.” PHH Corp., 839 F. 3d at 17, 31.
Although the U.S. Court of Appeals for the D.C. Circuit later ruled the CFPB’s structure constitutional, Justice Kavanaugh’s statements during his confirmation process reinforce that his views on the CFPB and over-regulation remain the same. During the second day of the confirmation hearings, Justice Kavanaugh stated: “I’ve heard it said that I’m a skeptic of regulation,… I’m not a skeptic of regulation at all. I’m a skeptic of unauthorized regulation, of illegal regulation, of regulation that is outside the bounds of what the laws passed by Congress have said.” Given his harsh criticism in PHH Corp., it is not hard to imagine that Justice Kavanaugh had the CFPB in mind as the prime example of the unchartered regulation he opposes.
While it is uncertain if the question of the CFPB’s constitutionality will come before the Supreme Court, Justice Kavanaugh’s overt skepticism of over regulation should bode well for the financial services industry in the cases that do make it to the Supreme Court. Two key cases of note, which Judge Kavanaugh will have an opportunity to hear this Term, are Obduskey v. McCarthy & Holthus LLP, 17-1307 and Greer v. Green Tree Servicing, LLC, 17-1351, on appeal from the Ninth and Tenth Circuits.
Obduseky and Greer address the hotly contested issue of whether the Fair Debt Collection Practices Act (“FDCPA”) applies to non-judicial foreclosure proceedings. Currently, there is a split of authority between the Circuit Courts, with the 9th and 10th Circuits holding that the FDCPA does not apply to non-judicial foreclosure proceedings, and the 4th, 5th, and 6th Circuits holding that the FDCPA does apply. The application of the FDCPA in the non-judicial foreclosure context is a significant concern to the financial services industry because it requires “debt collectors” to provide certain disclosures when collecting upon a debt and imposes a variety of other restrictions on debt collection activities. The Supreme Court’s decision on whether the FDCPA applies in the non-judicial foreclosure context will thus directly impact how financial services providers conduct the very high volume of non-judicial foreclosure proceedings occurring throughout the nation.
Justice Kavanaugh’s history and skepticism of regulation suggests that he will side with the 9th and 10th Circuit. And because Justice Kavanaugh tips the Supreme Court to the right by one, his vote may be critical to the Supreme Court ruling that the FDCPA does not apply to non-judicial foreclosure proceedings. If Justice Kavanaugh votes as his history and tendencies suggest, his addition to the Supreme Court could benefit the financial services industry on the debated issue of the FDCPA’s application to non-judicial foreclosures, and potentially foreshadow further favorable rulings in the future.