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WBK Industry News - Litigation Developments

DC District Court Denies CFPB Enforcement of CID For Lack of Authority

The United States District Court for the District of Columbia recently rejected an attempt by the Consumer Financial Protection Bureau (CFPB) to enforce a civil investigative demand (CID) against the Accrediting Council for Independent Colleges and Schools (ACICS), an organization that accredits for-profit institutions of higher education.

The CFPB issued the CID with a stated purpose of investigating unlawful acts or practices with regard to accrediting for-profit colleges.  The ACICS objected, stating that the CFPB had no authority over their actions in accrediting institutions, and that the CFPB’s authority was limited to investigating actions related to consumer financial laws.  The CFPB countered that they clearly have authority to investigate for-profit schools with respect to their student lending activities, and because of this, they also had the authority to investigate whether any unlawful acts occurred in the accreditation process related to those schools.

The Court was pithy and clear in its response to the CFPB, stating that the CFPB’s “post-hoc justification” was “a bridge too far!”  Because the ACICS was not involved in any financial lending decisions made by the schools it accredits, the CFPB had no authority over them.  In another demonstration of the Court’s wariness towards the CFPB’s position, when the CFPB argued that the CFPB was not obligated to accept at face-value the statements of the ACICS’s interactions with the schools it accredits, and instead had the affirmative right to investigate whether these statements were true, the Court responded simply:  “Please.”

Ultimately, the Court relied on the statement of purpose in the CID, which is statutorily required in order for the CID to be validly issued, in finding no authority.  Because the CID stated its purpose as investigating the accreditation process, something the CFPB has no authority over, the CID was invalid, and the Court denied the CFPB’s petition to enforce it.