CID – Consumer Financial Services Watch

U.S. District Court (Again) Rules that Parties Can Challenge a CFPB Information Request Without Revealing Their Identities

Jun 20 2016

Last week, a federal court issued an opinion supporting the ability of an entity to file a court challenge to Consumer Financial Protection Bureau (“CFPB”) information requests without necessarily needing to “out” itself as a potential investigation target. Specifically, the court reaffirmed a prior ruling that recipients of a CFPB civil investigative demand (“CID”) who were potential targets of an enforcement action could challenge the CFPB’s attempt to take certain testimony by proceeding as “John Doe” plaintiffs in a federal injunctive action. The district court first allowed the plaintiffs to proceed pseudonymously late last year, and last week’s order denied the CFPB’s motion for reconsideration. A description of the case background and judge’s original decision may be found in our earlier post on this case.

“A Bridge Too Far:” CFPB’s Authority Grab Rejected by Federal Judge

Apr 22 2016

By Soyong Cho and Ted Kornobis

Judge cautions new agency against “plow[ing] head long” beyond its jurisdiction

On April 21, 2016, the Consumer Financial Protection Bureau’s investigatory powers and civil investigative demand (“CID”) authority were soundly checked by federal district court judge Richard J. Leon. The Court denied the CFPB’s petition to enforce a CID issued to the Accrediting Council for Independent Colleges and Schools (“ACICS”) seeking information regarding accreditation of for-profit colleges, because the subject of the CID fell squarely outside of the CFPB’s enforcement authority. [1] Judge Leon’s ruling demonstrates that the right to judicial review can provide a backstop to an overly-aggressive and broad investigation.

CFPB Expands Its Targeting of For-Profit Schools and Pushes Jurisdictional Limits

Dec 04 2015

After suing two of the nation’s largest for-profit school chains, ITT and Corinthian, the Consumer Financial Protection Bureau (CFPB) is continuing its push to police the for-profit school industry. Bridgepoint Education, Inc. recently disclosed that on August 10, 2015, Bridgepoint and Ashford University received Civil Investigative Demands (CIDs) from the CFPB related to the CFPB’s investigation to determine “whether for-profit post-secondary-education companies” have engaged in unlawful acts or practices related to the advertising, marketing or origination of private student loans. And on October 29, 2015, the CFPB filed a lawsuit to compel the Accrediting Council for Independent Colleges and Schools (ACICS) to comply with a CID that the CFPB had issued to it on August 25, 2015. That CID concerns an investigation into possible legal violations “in connection with accrediting for-profit colleges.” These two actions suggest the CFPB will continue to pursue the for-profit industry, including associated entities such as ACICS that provide accreditation to such schools, apparently without concern over possibly exceeding its jurisdictional limits. This alert reviews the CFPB’s cases against for-profit schools to date and discusses the implications of the CIDs issued to Bridgepoint and ACICS.

D.C. District Court Decision Supports Principle of Allowing Companies to Challenge CFPB Information Requests without Fear of Public Disclosure of Investigation

Nov 05 2015

By: Ted Kornobis, Stephanie C. Robinson

Companies in receipt of a civil investigative demand (CID) from the Consumer Financial Protection Bureau (CFPB) are required to take a number of quick and important actions and make decisions that can have significant impact on the course and tenor of what will likely be a months- or years-long investigation. This can be a frustrating and high-pressure process, particularly given the limited practical options available under the CFPB’s rules for a CID recipient to effectively seek relief from what oftentimes can be broad and onerous requests. In particular, because of the CFPB’s policy to publicly identify any person or entity that files a petition to modify or set aside a CID, recipients of a CID generally forgo that route and instead are left to rely upon the reasonableness of the staff attorney and supervisor assigned to the matter. A recent decision in the U.S. District Court for the District of Columbia, however, may provide some measure of relief for CID recipients.

Are Public Companies Required to Disclose that the Government is Investigating Them?

Jul 13 2015

By: Jon Eisenberg

For many public companies, the first issue they have to confront after they receive a government subpoena or Civil Investigative Demand (“CID”) is whether to disclose publicly that they are under investigation. Curiously, the standards for disclosure of investigations are more muddled than one would expect. As a result, disclosure practices vary—investigations are sometimes disclosed upon receipt of a subpoena or CID, sometimes when the staff advises a company that it has tentatively decided to recommend an enforcement action, sometimes not until the end of the process, and sometimes at other intermediate stages along the way. In many cases, differences in the timing of disclosure may reflect different approaches to disclosure. We discuss below the standards that govern the disclosure decision and practical considerations. We then provide five representative examples of language that companies used when they disclosed investigations at an early stage.

To read the full alert, click here.

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