Although mired in significant legal challenges and a potentially hostile incoming presidential administration, the Consumer Financial Protection Bureau recently filed legal petitions against two financial companies seeking to force them to cooperate with administrative subpoenas known as “civil investigative demands” (CID). The agency filed the suits after the companies refused to produce records requested as part of CFPB investigations into whether the companies had violated the Truth in Lending Act and other consumer finance laws.
“Long-standing doctrine dictates that administrative agencies must be given wide latitude in asserting their power to investigate by subpoena,” the CFPB stated in one of its petitions. Indeed, companies caught in the crosshairs of the CFPB have had limited success challenging these subpoenas.
In November, the CFPB sued in a Detroit federal district court to force Harbour Portfolio Advisors, an investment firm that purchased foreclosed properties in bulk and resold them through high-interest installment contracts it called “contracts for deed.” Harbour challenged the agency’s demands, arguing that agreements for deed are not consumer financial products and do not fall within the CFPB’s jurisdiction. National Asset Advisors and National Asset Mortgage, which work with Harbour to collect payments and market its homes, made a similar argument. Their challenges, like most filed with the bureau, were denied by CFPB Director Richard Cordray.
In December, the CFPB alleged that Zero Parallel LLC, which develops leads for payday lenders, had dragged its feet producing emails that were requested in April as part of an investigation into “the marketing, selling, or collection of payday loans.” According to the CFPB petition filed in Los Angeles federal court, the company complied with portions of the investigative demand and worked with the CFPB to modify others, but the two sides continued to disagree about emails. The company initially agreed to produce the emails, but later argued the CFPB lacked authority to demand them and instead offered to “voluntarily” provide them on its own schedule, raising concerns that the production would be delayed by months.
While these two federal courts weigh the merits of the CFPB petitions, a highly-anticipated decision from a third court is expected early in 2017. A Washington federal appeals court next year is expected to pronounce on the extent of the CFPB’s subpoena power in a challenge brought by the nonprofit accreditor of some of the country’s most controversial for-profit colleges. A trial judge in April said the agency had plowed “into fields not clearly ceded to them by Congress.”