CFPB Rejects Request to Set Aside or Modify CID

The CFPB’s acting director, Mick Mulvaney, recently issued a decision and order denying a petition filed by a debt collector to set aside or modify the second of two civil investigative demands issued to the entity by the CFPB.

The second CID, issued in September 2017, sought information about the entity’s debt collection practices, and included a Notification of Purpose stating that the CID had been issued to determine whether debt collectors, depository institutions, or other persons have engaged or are engaging in unlawful acts and practices in connection with the collection of debt in violation of the CFPA or the FDCPA, or any other Federal consumer financial law, and whether CFPB action to obtain legal or equitable relief would be in the public interest.  The entity filed its petition to set aside or modify the CID following the required meet-and-confer process with the CFPB.

The entity argued that the CID should be set aside because: (i) the FDCPA violations asserted by the CFPB are not actionable under the bona fide error rule; (ii) the CID’s issuance is not within the CFPB’s authority under the Dodd-Frank Act because the CFPB had not identified, and cannot identify, any legally cognizable reason to believe the entity violated the FDCPA; and (iii) the entity had already produced data and documents pursuant to the first CID, and should not be required to produce more.

The CFPB refused to set aside the CID, finding that: (i) an entity’s fact-based arguments about whether it has complied with substantive provisions of the CFPA or any other enumerated consumer law, such as the FDCPA, are not valid defenses to enforcement of a CID; (ii) the CFPB is not required to identify a legally cognizable violation prior to issuing a CID, and need only state the nature of the conduct constituting the alleged violation which is under investigation and the provision of law applicable to such violation; and (iii) there is no authority precluding follow-up requests for information.

The entity alternatively argued that the CID should be modified: (i) because the CID seeks nonexistent information which the entity is not required to create under the Federal Rules of Civil Procedure; (ii) to include definitions for the terms “settlement options” and “credit bureau disclosures”; (iii) because the CID requests are disproportionate, as: (a) complying with the requests would impose an undue burden because the requests require a manual review of hundreds of thousands of audio files; (b) they are “unlikely to serve an investigatory purpose; and (c) they impose an unnecessary burden, and instead of demanding all recordings, should have requested a sampling; and (iv) some of the recordings requested are time-barred under the FDCPA.

The CFPB refused to modify the CID, finding that: (i) the entity admitted, in its petition, to possessing the requested information; (ii) the CFPB has already provided the entity with its understanding of the terms “settlement options” and “credit bureau disclosures”; (iii) the arguments that the CID is disproportionate fail because they are conclusory and based on the incorrect argument that the investigation is improper because the entity believes it has not violated the law; and also because the sampling approach cannot be considered as it was not raised during the meet and confer; and (iv) the recordings requested are not time-barred because the limitations period has not yet begun to run.

The entity also requested confidential treatment for its petition and the CFPB’s order.    While the CFPB rejected the entity’s confidentiality request on the basis that the entity failed to demonstrate good cause for omitting these materials from the public record in their entirety, the CFPB found that good cause existed to redact those portions of the petition that contain confidential supervisory information.