RSSLast month, the U.S. Court of Appeals for the District of Columbia handed down a ruling against a Civil Investigative Demand issued by the Consumer Financial Protection Bureau to the Accrediting Council for Independent Colleges and Schools (ACICS).
The CFPB had stated that the purpose of the CID was to see if any federal laws had been broken by ACICS. The council countered by filing a petition in federal court to set aside the CID as “overly broad” and therefore “unenforceable.” The D.C. Circuit’s decision agreeing with ACICS sets an important precedent for entities subject to bureau investigations.
The CFPB issued the CID against the accrediting organization in August 2015, at a time of intense public scrutiny of ACICS’s accreditation of for-profit colleges, which eventually resulted in the U.S. Department of Education withdrawing the organization’s status as a recognized accreditor. The CID’s stated purpose, set forth in its “Notification of Purpose,” was to investigate whether “any entity or person has engaged or is engaging in unlawful acts and practices in connection with accrediting for-profit colleges” in violation of “any” federal consumer financial protection law.
In 2016, a federal district court denied a petition by the bureau to enforce the CID, finding that the CFPB lacked the statutory authority to issue the CID because it “target[ed] the accreditation process” despite the agency having a mandate from Congress that did not seek to “address, regulate, or even tangentially implicate the accrediting process of for-profit colleges.”
In last week’s decision, the D.C. Circuit panel upheld the district court on the narrower grounds that the CID was impermissibly vague and provided insufficient notice under a statutory requirement that bureau CIDs “state the nature of the conduct constituting the alleged violation which is under investigation and the provision of law applicable to such violation.” The court found that the CID did not meet this standard because it provided “no description whatsoever of the conduct” under investigation and failed to explain the meaning of “the broad and non-specific term ‘unlawful acts and practices’” in the context of the particular investigation.
The vague language that troubled the court in the ACICS case is typical of CFPB CIDs. The decision, the first ever dismissal of a CFB CID, therefore promises to have major implications. It seems likely that other entities under the shadow of a CID will also seek dismissal on similar grounds. It may also be that the CFPB will be forced to rework the language if its CIDs and limit their scope.
