Receipt of a civil investigative demand (CID) from any federal agency means that a significant amount of a company's time and money will soon be tied up responding to the demand. The Consumer Financial Protection Bureau (CFPB) in particular has been known for broad, wide-ranging CIDs that probe the limits of the agency's jurisdiction. However, the CFPB's occasional overreach and several losses in court, coupled with the change in CFPB leadership, likely led to last week's announcement regarding changes to the CFPB's policies regarding CIDs.
According to the CFPB's press release, the agency's CIDs will now provide "more information about the potentially applicable provisions of law that may have been violated." The CIDs will also specify which business activities are subject to the CFPB's authority, especially where the agency's authority is a significant basis for the investigation.
The announcement acknowledges that the CFPB took into account recent court decisions regarding the CIDs Notification of Purpose, including the DC Circuit's decision in CFPB v. Accrediting Council for Independent Colleges and Schools (ACICS). In that case, ACICS secured a unanimous decision upholding a district court ruling that a CID issued by the Bureau was unenforceable—finding that the CFPB "failed to provide ACICS with sufficient notice as to the nature of the conduct and the alleged violation under the investigation," as required under the Dodd-Frank Act. Moreover, these recent decisions also correlate with a 2017 report by the CFPB's Office of Inspector General that encouraged updating the Office of Enforcement's policies to reflect developments in the law.
In addition to recent court opinions, the CFPB received and incorporated public feedback received in response to its Requests for Information (RFIs) issued in January 2018, which sought comments and information regarding the CID process and whether or how the process may be updated, streamlined, or revised to better achieve the Bureau's statutory purpose and objectives, while minimizing the burden on recipients.
We will continue monitoring for additional developments.