A federal court in Pennsylvania recently denied a petition from a student loan servicer, Heartland Campus Solutions, for a stay of a civil investigative demand from the Consumer Financial Protection Bureau.
It was the first CID challenged under the leadership of CFPB Director Mick Mulvaney. The court’s decision can be read here.
In order to pursue its mandate to enforce federal consumer financial laws, the CFPB has authority to compel the production of documents or testimony by issuing a CID to anyone the bureau believes has information relevant to a violation of those laws. A CID, according to statute, must identify “the nature of the conduct constituting the alleged violation and the provision of law applicable to such violation.”
The CFPB originally sent the CID to Heartland in March of 2017. The bureau was investigating Heartland for possible “unfair, deceptive, or abusive acts or practices” and potential violations of the Fair Credit Reporting Act. The CID identified the following categories of conduct among those on which the CFPB was focusing: “processing payments, charging fees, transferring loans, maintaining accounts, and credit reporting.”
Heartland argued that the CID was impermissibly broad. They conceded that if the CFPB issued a CID for any one of the business categories, they would be bound to comply. However, to produce documentation on every part of their business was too burdensome, they argued. The bureau demanded documents from “all component functions of any student loan servicing business,” Heartland said, without giving notice of what conduct the CFPB was investigating.
Heartland claimed this violated the requirement to specify “the nature of the conduct constituting” a violation. They conferred with the CFPB to address concerns about the scope of the CID, but ultimately refused to comply with it. The CFPB then filed a petition in federal district court to compel compliance. The district court granted the petition, and Heartland appealed.
The appellate court rejected Heartland’s argument, holding that their own logic worked against them. Heartland’s argument, they said, “rests on the flawed assumption that the CFPB could not investigate all of their conduct.” In fact, the court said, “Nothing prohibits the CFPB from investigating the totality of [a company’s] business activities.” Therefore, the district court’s grant of the CFPB’s petition to enforce the CID was affirmed. The decision means that in the future the bureau need not limit its request to information relating to any specific aspect of an entity’s activities.