Banking and Finance Law Daily CFPB denies request to postpone CID pending decision on constitutionality of Bureau’s structure
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Tuesday, January 14, 2020

CFPB denies request to postpone CID pending decision on constitutionality of Bureau’s structure

By Nicole D. Prysby, J.D.

A debt service provider’s petition to set aside a civil investigative demand pending a decision on whether the Bureau is unconstitutionally structured is denied, because the petitioner failed to show that it conferred reasonably with Bureau staff regarding the CID.

On Dec. 26, 2019, Consumer Financial Protection Bureau denied a petition from Equitable Acceptance Corporation (EAC) to set aside or modify a civil investigative demand (CID) issued to it by the Bureau. The CID was issued as part of an investigation against EAC, a debt service provider that allegedly provided funding to consumers to help them purchase document preparation services from companies who assist consumers in completing the paperwork necessary to participate in student loan debt relief programs. EAC argued that the Oct. 23, 2019, CID should be set aside, pending a decision from the U.S. Supreme Court on whether the Bureau is unconstitutionally structured. The Bureau concluded that EAC had failed to show that it conferred reasonably with the Bureau about the CID and therefore the petition should be denied.

The CID was issued as part of an investigation against EAC, a debt service provider that has provided funding to consumers to help them purchase document preparation services from companies who assist consumers in completing the paperwork necessary to participate in the Department of Education’s student loan debt relief programs. Claims against EAC, brought by the FTC and state attorneys general, were previously settled and EAC is under a nationwide injunction that permanently bans it from providing financing in connection with debt relief products and services. In its petition, EAC argued that the documents and materials sought in the CID are overly burdensome, the time frame to respond is too short, and the enforcement is duplicative of the FTC’s earlier investigation. This burden is unwarranted, argued EAC, because there is uncertainty as to whether the Bureau has the authority to issue a CID. The CID should either be set aside or stayed until the Supreme Court issues its decision in Seila Law v. CFPB.

The Bureau denied the petition because the administrative CID process is not the proper forum for raising constitutional challenges to the Bureau’s statute and because EAC failed to show that it engaged with Bureau staff about how to alleviate any undue burden, such as proposing modifications to the substance of the requests. EAC’s description of the meet-and-confer meeting with the Bureau about the CID states only that it raised constitutional objections and was the subject of a previous investigation by the FTC and state attorneys general. The petition also states that the Bureau offered to extend the deadline for responding to the CID but EAC did not agree to the extension. Because EAC did not show that it satisfied its burden to confer reasonably with Bureau staff on any burden imposed by the CID, the petition is denied and EAC is directed to comply with the CID within 10 days.

Attorneys: Lucy E. Morris (Hudson Cook, LLP) for Equitable Acceptance Corp.

Companies: Equitable Acceptance Corp.

MainStory: TopStory CFPB DebtCollection EnforcementActions Loans OversightInvestigations

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