by Richard E. Gottlieb
and Jeffrey E.
By now you may have heard that the Consumer Financial Protection Bureau has now twice
denied petitions to modify or set aside a civil investigative demand
(CID). No surprises here, and the CFPB has yet to modify or set aside such
a CID. As reported
by our CFPB-Lawblog in September, the CFPB earlier denied
a petition by PHH Corporation (PHH). Now CFPB Director Cordray has again refused
to modify or set aside a petition
from Next Generation Debt Settlement, Inc. In this most recent denial, Cordray
now includes some meaningful warnings for financial services
providers regarding the CID process.
The first lesson: Pay attention to deadlines and
other procedural requirements. Here, the CFPB rejects the petition for
failure (1) to file the petition within 20 calendar days of service of the CID
§ 5562(f)(l); 12
C.F.R. § 1080.6(e)); and (2) to meet and confer with a Bureau
investigator within 10 calendar days after receipt of the CID (12 C.F.R.
§ 1080.6(c)). Next Generation was served with the CID on August
4, 2012, but apparently failed to file its petition until September 4, 2012-11
days late. Next Generation, the CFPB states, failed "to meet and confer with
Bureau staff prior to filing [its petition]." The CFPB added that the "lack of
any attempt to meet and confer provides an additional basis to deny the
The second lesson: The CFPB won't let the limits of
its own investigative authority get in the way of a CID. Next Generation
argued in its petition that the CID should be waived or modified because the
company had substantive defenses to any enforcement action. The CFPB, citing Oklahoma
Press Publishing Co. v. Walling, 327 U.S. 186, 201
(1946), rejected those arguments. Here, Director Cordray stated that the Bureau
has investigative authority "to discover and procure evidence,
not to prove a pending charge or complaint, but upon which to make one if, in
the Bureau's judgment, the facts thus discovered should justify doing
so." This part of the ruling, which was unnecessary given Next Generation's
purported procedural failings, was plainly intended to send a message to
covered entities that a defense based on the merits to the CFPB's
investigations is not a defense to the CID itself. "[F]acts relating to whether
Next Generation is covered by or has violated a federal consumer
financial law are not defenses to the enforcement of a
CID, even if they might eventually be defenses to legal claims
contemplated in the CID."
Although the Administrative Procedure Act may arguably
provide relief, neither Dodd-Frank nor the rules established by the CFPB
provide Next Generation with a vehicle for appealing this decision. Stay tuned
to the CFPB-Lawblog for updates and analysis as this story evolves.
Read more articles about the Consumer Financial Protection
Bureau at Dykema's CFPB Blog
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