Banking and Finance Law Daily CFPB partially modifies two CIDs
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Tuesday, June 4, 2019

CFPB partially modifies two CIDs

By Nicole D. Prysby, J.D.

The CFPB partially modified two CIDs, although it rejected arguments that it lacks enforcement authority over a tax debt relief service provider and that its request to a deferred-interest credit cards marketer is unduly burdensome.

The Consumer Financial Protection Bureau has issued two orders modifying Civil Investigative Demands (CIDs) sent by the Bureau, in response to petitions filed by the CID recipients. The Bureau modified the notification of purpose for both CIDs and withdrew or modified several specific requests in one CID. The Bureau rejected the recipients’ arguments that it lacks enforcement authority over them, and that the CIDs are vague, burdensome, or should be limited to information relevant to determining whether the Bureau has enforcement authority over the recipients.

W&A. Tax representation service provider Wall & Associates (W&A) petitioned the Bureau to set aside a revised CID issued to it in September 2017. The CID’s notification of purpose stated that it was issued to determine whether providers of tax debt relief services are offering financial advisory services to consumers, or have engaged in unfair, deceptive, or abusive acts in violation of the Consumer Financial Protection Act. W&A argued that the Bureau lacks enforcement authority over it, because the CFPA does not apply to W&A, as its services are not a "consumer financial product or service." W&A also argued that the CID’s notice of purpose does not comply with the statute authorizing Bureau CIDs. The Bureau’s Order rejected W&A’s argument that it is not subject to the Bureau’s enforcement authority because the CFPB is authorized to issue a CID to any person who may have information relevant to a violation. The Bureau may investigate whether it has enforcement authority over W&A, and need not accept as true W&A’s factual assertions that its business does not include any activities covered by the CFPA. And the Bureau’s investigation need not be limited to information relevant to determining whether the Bureau has enforcement authority over W&A; an agency may simultaneously investigate jurisdictional facts and possible violations.

The notification of purpose was modified to add a statement that an additional purpose of the investigation is to determine whether false and misleading representation were made to consumers regarding tax debt relief services. The Bureau rejected W&A’s argument that the notification of purpose must state particular persons who engaged in the conduct and must state whether W&A itself is under investigation.

Synchrony Financial. Synchrony Financial markets and services deferred-interest credit cards and was issued a CID in August 2018. The company petitioned the Bureau to set aside the CID on the grounds that it does not provide an adequate notification of purpose, seeks information not relevant to an investigation, and is unduly broad and burdensome. The Bureau sought information on whether misrepresentations about deferred-interest credit cards were made to consumers at the point of sale. Synchrony argued that oral misrepresentations related to deferred-interest financing are not relevant because no such representations were made, or they were not numerous, or they were not made by Synchrony. But, the Bureau stated, these objections go to whether Synchrony complied with the law, not whether the information the Bureau seeks is relevant. The Bureau rejected Synchrony’s argument that it could not seek information regarding transactions in 2013, because that is outside the limitations period for potential violations of the CFPA. Even if true, the information may allow the Bureau to develop an understanding of Synchrony’s practices. Synchrony also argued that the training materials sought by the Bureau are not relevant. But the materials relate to Synchrony’s training of individuals who made representations about deferred-interest credit cards at the point of sale and are therefore relevant to connecting Synchrony to the representations (or misrepresentations) made by individuals who interact with consumers.

The Bureau did modify the notification of purpose and on the recommendation of Enforcement counsel, withdrew the request for two written reports and made modifications to the interrogatory and document requests. For example, Synchrony argued that the Bureau’s suggested sampling methodology for one report would actually increase the time to respond; Synchrony may ignore the suggested sampling. The Bureau rejected Synchrony’s argument that the requests are unduly burdensome. Synchrony employs 16,000 individuals and has $91 billion in assets, and made no showing that the CID would pose a threat to its normal operations. The Bureau extended the time for Synchrony to respond to the CID.

Companies: Synchrony Financial; Wall & Associates

MainStory: TopStory CFPB CreditDebitGiftCards EnforcementActions UDAAP

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