The Bureau of Consumer Financial Protection (the “Bureau”) alleged that the bank violated federal consumer protection statutes in its customer dealings. Specifically, the Bureau alleged that the bank was opening accounts or adding additional products or services to existing customer accounts without authorization and collecting additional fees as a result. The parties came to a settlement contingent upon the district court approving the jointly submitted consent decree. The court addressed various concerns raised by consent decrees, including jurisdiction, equitable, and administrability concerns.
In Bureau of Consumer Fin. Prot. v. Fifth Third Bank, N.A., No. 1:21-cv-262, 2024 WL 3451080, 2024 U.S. Dist. LEXIS 126902 (S.D. Ohio July 18, 2024) (opinion not yet released for publication), the district court found that it had the jurisdiction to approve and enter the jointly submitted consent decree and that doing so was an appropriate exercise of its equitable remedial powers, and ultimately entered the proposed consent decree. The court cited the Sixth Circuit’s binding holding, which provides “that a court has jurisdiction to enter a consent decree in support of settlement so long as the decree (1) ‘spring[s] from and serve[s] to resolve a dispute within the court’s subject-matter jurisdiction,’ (2) ‘come[s] within the general scope of the case made by the pleadings,’ and (3) ‘further[s] the objective of the law upon which the complaint was based.’ Benalcazar v. Genoa Twp., 1 F. 4th 421, 425 (6th Cir. 2021). The action here involved allegations that the bank violated federal statutes that the Bureau has the power to enforce; therefore, the court had subject-matter jurisdiction. 28 U.S.C. § 1331. Second, in relation to the scope of the pleadings, the court found that the proposed consent decree fell well within the scope of the case. The consent decree prohibited any bank activity that violated the Bureau’s provisions and that the Bureau alleged it was wrongfully engaged in previously. The consent decree also required the bank to maintain records, conduct ongoing reporting, and provide a compliance plan, all in relation to the bank’s previous activities. Finally, the court found that the consent decree furthered the objective of the law. Congress adopted the regulations at issue presumptively on the basis that they would serve customers’ interests – it provided customers with fair, transparent, and competitive services and markets. The enforcement of the regulations, as the Bureau sought to do in the settlement agreement, served to achieve those objectives. The district court, therefore, found all three requirements necessary to give it jurisdiction to enter a consent decree here. The court then noted the Sixth Circuit’s holding that a court is to use “traditional equitable principals” and determine “‘whether a decree is fair, adequate, and reasonable, as well as consistent with the public interest’” in its decision of whether to issue a permanent injunction (which, the court reasoned, is what a consent decree is equivalent to). United States v. Lexinton-Fayette Urb. Cnty. Gov’t, 591 F.3d 484, 489 (6th Cir. 2010). The court noted that generally, the types of injuries alleged here have adequate remedy at law. However, remedies at law here would have been difficult since unknowing customers suffered the harm and because the Bureau sought to advance regulatory interests to prevent the harms from occurring in the first place. Additionally, Congress provided in the statute that the Bureau could seek injunctive relief. The court also noted that the balance of harms favored injunctive relief because both the Bureau and bank agreed to the consent decree, suggesting that both parties determined the entire settlement provided more benefits than harm. Lastly, the court concluded that the settlement agreement here was fair, equitable, and reasonable because the consent decree emerged from vigorous negotiations between the parties, indicating that each party found it fair, adequate, and reasonable. Therefore, the court ultimately found that the consent decree should be issued on the basis of traditional equitable principles. Finally, the court addressed a final issue concerning a consent decree’s (or any order that requires judicial monitoring) administrability. There are two factors when weighing the administrability: definiteness and judicial ability. There must be sufficient clarity, and the order decree must describe in sufficient detail the obligations of the parties for courts to carry out a consent decree, and the court concluded the consent decree here satisfied definiteness. Next, the court stated that judges must be mindful of resources, expertise, and authority when considering their role in carrying out an order. The court found that the proposed decree did not raise any such concerns. Ultimately, the district court concluded it had the authority to enter the proposed consent decree and found in favor of entering the order.
By Olivia Lewis [email protected]
Edited By Kristin Meurer [email protected]
Edited By Hayden Mariott [email protected]