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  • Judge orders student loan servicer to comply with CFPB CID


    On February 28, the U.S. District Court for the Western District of Pennsylvania granted the CFPB’s petition to enforce a Civil Investigative Demand (CID) issued against a student loan servicer. According to the opinion, the student loan servicer filed a petition with the CFPB to set aside a June 2017 CID because the statutorily-mandated Notification of Purpose did not comply with the Bureau’s notice requirements under 12 U.S.C. § 5562(c)(2). The loan servicer argued that the CID’s list of activities under investigation—i.e., processing payments, charging fees, transferring loans, maintaining accounts, and credit reporting—failed to provide the servicer with fair notice as to the nature of the investigation because it “merely categorize[s] all aspects of a student loan servicing operation.” The CFPB denied the petition, and in November 2017, filed a petition in court to enforce the CID. In granting the Bureau’s petition, the court found that the Notification of Purpose met the statutory notice requirements because nothing in the law bars the CFPB “from investigating the totality of a company’s business operations.” Moreover, the court also found that the CID’s Notification of Purpose met the necessary requirements regarding administrative subpoenas set forth by the U.S. Court of Appeals for the 3rd Circuit, concluding that the investigation is for a “legitimate purpose,” the information requested is relevant and not already known by the Bureau, and the request is not unreasonably broad or burdensome.

    Courts CFPB Student Lending CIDs Appellate Third Circuit

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  • CFPB releases RFI on CIDs

    Federal Issues

    On January 25, the CFPB released its Request for Information (RFI) on Civil Investigative Demands (CIDs), which solicits public comment on “how best to achieve meaningful burden reduction or other improvement to the CID processes while continuing to achieve the Bureau’s statutory and regulatory objectives.” The RFI broadly requests feedback on “all aspects” of the CID process but also highlights specific topics on which comment is requested, including (i) the Bureau’s process for initiating investigations and issuing CIDs; (ii) the delegation of authority to officials within the CFPB’s Office of Enforcement; (iii) steps the Bureau could take to improve recipients’ understanding of investigations and the information sought by CIDs; (iv) timeframes and certifications for responses; (v) modifications and objections to CIDs; and (vi) the rights of entities and individuals who are compelled to provide testimony, including the right to have counsel present. 

    As previously covered by InfoBytes, the CFPB announced its plan to publish a series of RFIs seeking public input on the way the Bureau is performing its statutory obligations. The RFI was published in the Federal Register on January 26 and comments are due by March 27.  

    Federal Issues CFPB Succession RFI Enforcement CIDs

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  • CFPB succession update: CFPB requests zero funding; seeks public comment regarding Bureau’s activities; & more

    Federal Issues

    On January 17, in a letter to Federal Reserve Chair Janet Yellen, acting CFPB Director Mick Mulvaney requested zero dollars for the Bureau’s quarterly operating funds. Each fiscal quarter, as required by law, the CFPB formally requests that the Federal Reserve transfer a specified amount of money to the Bureau so it can perform the functions outlined in its budget. In his letter, Mulvaney stated that the prior Director maintained a “reserve fund” for the CFPB, and the money in this fund is sufficient to cover the CFPB’s expenses for the second quarter. This will be the first time in the history of the CFPB that its Director has requested no additional amount to fund quarterly operations. The CFPB also announced its plan to publish a series of Requests for Information (RFIs) in the Federal Register seeking public input on the way the Bureau is performing its statutory obligations. These RFIs will request “comment on enforcement, supervision, rulemaking, market monitoring, and education activities.” The first RFI will seek information regarding the Bureau’s Civil Investigative Demand processes and procedures.

    On January 18, the CFPB voluntarily dismissed its case against four online installment lenders for allegedly deceiving customers by collecting debts that were not legally owed, previously covered by InfoBytes here. The complaint, filed in the United States District Court for the Northern District of Illinois, alleged, among other things, that the lenders engaged in unfair, abusive, and deceptive acts—a violation of the Dodd-Frank Act—by collecting on installment loans that are partially or wholly void under state law. In September 2017, the case was transferred to Kansas, where the Bureau’s notice of dismissal was filed. The notice does not specify a reason for the dismissal.

    Federal Issues CFPB Succession CFPB Enforcement CIDs Federal Reserve Federal Register UDAAP Installment Loans Debt Collection

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  • CFPB Withdraws CID, Petition to Enforce CID is Moot Due to Lack of Subject-Matter Jurisdiction


    On June 8, the CFPB filed a petition to withdraw a 2015 CID issued to a financial services company concerning its structured settlement and annuity payment purchasing activities, and subsequently agreed to the dismissal of the petition to enforce the CID as moot due to lack of subject-matter jurisdiction. The action stems from a petition filed by the company to set aside the CID, arguing that structured settlements and annuity payment purchasing is not an extension of credit, nor qualifies as a consumer financial product. Therefore, the company claimed, its business activities do not fall under the CFPB’s UDAAP or Truth in Lending Act authority. The Bureau denied the petition, and in June 2016, it filed a memorandum in the U.S. District Court for the Eastern District of Pennsylvania for an order requiring the company to comply with the CID, asserting that “regulations authorize the Bureau to petition the district court in ‘any judicial district in which [that entity] resides, is found, or transacts business’ for an order to enforce the CID.” However, on June 5, the CFPB filed a notice to withdraw stating that “[b]ecause the CID is no longer active, the Bureau intends to soon dismiss the Petition,” and asked the court to “refrain from ruling on the petition.” The CFPB did not disclose a reason for its decision to withdraw the CID.

    Notably, before the dismissal, the U.S. Chamber of Commerce (Chamber) filed an amicus brief opposing the CFPB’s petition. The Chamber opined that, should the CFPB be allowed to issue CIDs under a “virtually unlimited definition of the term ‘financial advisory services,’” under which it would include “advice with a financial element offered in connection with transactions unrelated to a consumer financial product,” it would expand the Bureau’s jurisdiction beyond the limits of Dodd-Frank’s prohibition on unfair, deceptive, and abuse acts and practices.

    Courts CFPB CIDs UDAAP TILA Litigation Financial Advisers

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  • CFPB Denies Data Provider’s Petition to Set Aside CID

    Consumer Finance

    In a Decision and Order released last month, the CFPB denied a Petition to set aside or modify a civil investigative demand (CID) directed to a data provider (“Petitioner”). The order also directed Petitioner to produce responsive information within 10 calendar days. 

    The CFPB originally issued the CID on January 5 in connection with its efforts to gather information about Petitioner’s business, products, services, and operations. According to Petitioner, the stated purpose of the CID “purport[ed] to exercise jurisdiction over [Petitioner] under the Fair Credit and Reporting Act (‘FCRA’) or under ‘any other federal consumer financial law.’” On January 25, Petitioner moved to set aside or modify the CID arguing, among other things, that: (i) the Bureau lacks jurisdiction over Petitioner because Petitioner is neither a consumer reporting agency (“CRA”), nor a “covered person” or “service provider” under a “federal consumer financial law”; (ii) the CID’s Notification of Purpose is impermissibly vague in that it fails to adequately state the “nature of the conduct constituting the alleged violation” and/or “the provision of law applicable to such violation”; and (iii) the CID is “impermissibly overbroad and seeks information which cannot possibly be related to or reasonably relevant to the inquiry at hand (which itself remains unclear and undefined).”

    Ultimately, the CFPB determined that none of three objections raised by Petitioner “warrant[ed] setting aside or modifying the CID.” In response to the argument that the CFPB lacks jurisdiction, the Bureau interpreted its authority under the Consumer Financial Protection Act to include investigative authority to issue CIDs to “any person” who may have information “relevant to a violation” of any federal consumer financial law, regardless of whether that person or entity is subject to CFPB authority. In response to Petitioner’s argument regarding the vagueness of the CID’s Notification of Purpose, the Bureau stated that the argument fails because “it is well settled that the boundaries of an agency investigation may be drawn ‘quite generally.’” Finally, as to Petitioner’s objection that the CID was overbroad and/or sought irrelevant information, the Bureau concluded that this was merely a restatement of the jurisdictional argument and fails for the same reasons.  The CFPB explained that the question of whether Petitioner is properly subject to CFPB authority need not be answered at the outset of an investigation, because it is the type of question “the investigation is designed and authorized to illuminate.”

    Consumer Finance CFPB CIDs FCRA Consumer Reporting Agency

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  • In a Split Decision, D.C. Circuit Denies John Doe Company’s Request to Remain Anonymous Pending Appeal Challenging CFPB Subpoena; Judge Kavanaugh Dissents, Reiterates Critique of CFPB


    On March 3, 2017, the U.S. Court of Appeals for the District of Columbia Circuit denied the request of an anonymous California-chartered, finance company based in the Philippines to remain anonymous pending the resolution of its challenge to a CFPB administrative subpoena. See John Doe Co. v. CFPB, March 3, [Order] No. 17-5026 (D.C. Cir. Mar. 3, 2017) (per curiam). In a 2-1 decision, the court found that the company had failed to show either that it was likely to succeed on the merits of its challenge to the CFPB’s constitutionality, or that it was likely to suffer irreparable harm from being identified as being under investigation. In denying the company’s motion, the panel majority emphasized, among other things, the fact that “[t]he Company’s sole argument regarding likelihood of success on the merits before this court and the district court has been to point to the now-vacated majority opinion in PHH.”   Judge Kavanaugh—who  back in October, assailed the “massive, unchecked” power of the single director-led CFPB—filed a dissenting opinion, in which he reiterated his call for how to fix the CFPB: namely, giving the president greater power to remove the agency’s director.

    As previously covered on InfoBytes, back in January, the John Doe finance company filed an action seeking to set aside or keep confidential a “civil investigative demand” served on the Company by the CFPB as part of an industry-wide investigation against companies that buy and sell income streams. The Company argued both that the CFPB had strayed outside the scope of its authority, and that in light of the pending challenge to the constitutionality of its structure in a separate case (PHH v CFPB), the Bureau should be barred from pursuing any investigation until the questions about its constitutionality are resolved. Fearing that the CFPB would post documents on its website revealing its identity, the company also sought a temporary restraining order to enjoin the CFPB from, among other things, disclosing the existence of its investigation and taking any action against the company unless and until the CFPB is constitutionally structured. John Doe Co. v. CFPB, D.D.C., No. 17-cv-00049 (D.D.C. Jan. 10, 2017). As covered in a recent BuckleySandler Special Alert, however, the D.C. Circuit on February 16, vacated the October 2015 panel decision in PHH v CFPB and will now rehear the case en banc.

    Courts Consumer Finance CIDs John Doe v CFPB PHH v. CFPB Litigation

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