Last week, a federal court denied a petition to enforce a Civil Investigative Demand filed by the Consumer Financial Protection Bureau against a company that purchases structured settlements and annuities. The court ruling that denied the petition came despite a last-minute effort on the part of the bureau to withdraw its original motion. The order denying the CID can be found here.
The CFPB issued the CID to the company, J.G. Wentworth, in September 2015 to investigate alleged violations of consumer protection laws. Wentworth filed an administrative petition to set aside the CID as beyond the CFPB’s statutory authority, arguing that its purchase of settlements and annuities was not a consumer financial product or extension of credit subject to the CFPB’s UDAAP authority.
The CFPB denied the petition, asserting that Wentworth might be providing financial advisory services to consumers in connection with offers to purchase structured settlements or annuities. Such advice would arguably constitute a “consumer financial product or service” subject to Dodd-Frank. Wentworth initially produced some information, but ultimately refused to comply with the CID on the grounds the CFPB lacked jurisdiction over its activities. In response, the CFPB filed the petition to enforce.
In April, a federal court in the District of Columbia affirmed a lower court’s refusal to enforce a CFPB CID against an accreditor of online colleges. The lower court had ruled that the CFPB exceeded its statutory authority by issuing the CID because the accreditation process for-profit schools was not a financial product or service subject to CFPB regulation. In affirming the denial of the CFPB’s petition to enforce the CID, that court declined to reach the broader question of whether the CFPB had any jurisdiction at all over accreditation, but the higher court’s affirmation seemed to signal a limit to CFPB CIDs.
Less than a month later, the CFPB filed a motion in the Wentworth case to withdraw its CID. That motion made no mention of’ the scope of the bureau’s power. Rather, it stated that “the CID is no longer active.” The bureau specifically requested that the court refrain from ruling on the original petition to enforce. When the court declined, the bureau followed up with another brief claiming that because it had withdrawn the CID, the action was moot and must be dismissed by the court for lack of subject matter jurisdiction. No reason was given by the CFPB for its decision to withdraw the CID, but the court’s holding would suggest another limit to the CFPB’s CID power.