Federal law states that the Consumer Financial Protection Bureau “is authorized to engage in investigations and request information from covered persons, issue subpoenas or civil investigative demands, conduct hearings and adjudication proceedings, and commence civil actions in federal court.” Although subpoenas, hearings and litigation are familiar to most Americans, the concept of a “civil investigative demand” (CID) is not. Considering the CFPB’s increasing use of CID, the concept is worth a closer look.
Generally speaking, CIDs are statutorily provided discovery tools, authorizing government authorities to investigate possible violations of law by requiring targets to provide relevant information. CIDs are different from traditional discovery tools, in that they can be issued before any civil proceeding is commenced. According to a Columbia Law School article, “Though a number of constitutional, statutory, and procedural doctrines combine to delineate the boundaries of the CID power, the overall expansive nature of that power presents various policy concerns, implicating federalism, individual rights, and regulatory issues.”
Because no legal or administrative process is yet underway, a CID is difficult to handle. The CFPB offers basic CID guidelines on its website but the details are few. CIDs require compliance, as a CID is always related to an open investigation into an alleged violation of the law. The CFPB needs only a “factual basis” to issue a CID when it alleges unfair or deceptive practices have taken place. The CID must state the nature of the investigation generally but no advance warning is given.
The CFPB can request physical or electronic documents, or even oral responses to questions. The CFPB determines what format the documents must take, and the responsibility to convert materials to that format is on the recipient. CID targets must “meet and confer” with the CFPB enforcement attorneys within 10 calendar days of receiving a CID and file any formal petition to modify or quash a CID within 20 calendar days. If responding to the CID, companies will typically have 30 to 45 days to complete their response.
Targets of a CID may petition to have the CID quashed within 20 days of receipt, but that petition will be considered by the CFPB Director. After that time, the CFPB can seek a court order demanding compliance. Although a targeted entity might have their day in court, federal judges will defer to the agency under most circumstance. Also, the Bureau is authorized to seek civil contempt or other relief in cases where a court order enforcing a CID is ignored or violated.