Banking and Finance Law Daily Nexus argues that order prevents CFPB from seeking third-party CIDs
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Thursday, April 4, 2019

Nexus argues that order prevents CFPB from seeking third-party CIDs

By Nicole D. Prysby, J.D.

Nexus asserts that a stipulation and subsequent order entered into between it and the Bureau not only prevent the Bureau from seeking personal information of Nexus clients from Nexus itself, but also prevent the Bureau from seeking that information from third parties. The Bureau responded with an argument that the stipulation and order do not bar it from seeking the information via third-party CIDs and the court should enforce the order as written.

Nexus Services, Inc., and Libre by Nexus, Inc., (collectively Nexus) requested that the federal district court in the District of Columbia enforce the modified civil investigative demand (CID) agreed to between Nexus and the Consumer Financial Protection Bureau, in which the Bureau agreed not to seek personal information from Nexus regarding Nexus clients. Nexus clients are persons detained in immigration proceedings that Nexus assists by securing bonds for their release. In 2017, the CFPB served the companies with a CID to determine whether they committed unfair, deceptive, or abusive acts or practices in connection with offers for credit products or services. Nexus opposed the CID, and the parties entered into a stipulation for a modified CID not seeking personal information for clients. Nexus asserts that the stipulation (and the subsequent court order adopting it) also prevents the Bureau from seeking the personal information from third parties. The Bureau argues that it never made an agreement with respect to third-party CIDs and is therefore free to seek information from third parties (Consumer Financial Protection Bureau v. Nexus Services, Inc., Case Nos. 1-17-cv-02215-ABJ and 1-17-cv-02238-ABJ).

According to Libre, a subsidiary of Nexus Services, it is the largest and most successful for-profit program providing services for persons detained in immigration proceedings in the United States. One of its services is to assist its clients in securing bonds through licensed and regulated bond companies. As previously reported, in 2017, the CFPB served the companies with a CID. According to the Bureau, the purpose of the investigation was to determine whether persons who provide products or services related to bonds posted on behalf of detainees are extending credit or offering to extend credit and, if so, whether those persons have committed unfair, deceptive, or abusive acts or practices in connection with the marketing or selling of the products or services. Nexus and Libre filed a complaint against the Bureau arguing that the CID is premised on the mistaken belief that Libre provides or extends credit to consumers. The complaint claimed that the CID (which sought name and address information for all current Program Participants) is invalid. In 2018, the parties entered into a stipulation granting the Bureau’s petition to enforce its modified CID (which did not seek personal information of Program Participants) (see Banking and Finance Law Daily, Dec. 6, 2018).

At the time of the stipulation, the Bureau had already issued a third-party CID to Statewide Bonding, Inc., requesting the address, telephone number, and email address of Nexus Program Participants. In other words, Nexus argued, the Bureau pursued the addresses and phone numbers of Program Participants it sought in the Original CID but agreed not to seek in the Modified CID via a third-party CID. Nexus motioned the court to enforce the Modified CID and prevent the Bureau from otherwise seeking names and addresses of Program Participants from third parties.

Nexus argues that the Bureau’s actions violated the stipulation in the Modified CID. The company also argues that the Bureau’s actions were not taken in good faith. The Bureau opposes Nexus’ motion, and argues that the stipulation did not prevent it from seeking information from third parties. Therefore, it did not violate the stipulation. The Bureau points out that Nexus conceded that the Bureau never made an agreement with Nexus with respect to third-party CIDs, and that the admission is fatal to its motion. The court’s order does not preclude the Bureau from acquiring any type of information from third parties, so the Bureau cannot violate the order by doing so.

Nexus argued that the Bureau violated the spirit of the order, but the Bureau responded that the scope of the stipulation must be determined based on the language of the agreement itself, and that Nexus could have bargained for an agreement with this relief, but failed to do so. The Bureau also points out that Nexus’ key piece of evidence (that the Bureau issued a CID to Statewide Bonding, Inc.) is flawed, because the CID was issued before Nexus sued the Bureau. Therefore, it was not an "end-around," and the Bureau has no obligation to notify Nexus of its third-party discovery efforts.

Attorneys: David A. King Jr., Hai Binh T. Nguyen for CFPB. Mary Donne Peters (Gorby Peters Law), Anthony Francis Troy (Eckert Seamans Cherin & Mellott, LLC), Jeffrey P. Brundage (Eckert Seamans Cherin & Mellott, LLC) for Nexus Services, Inc., and Libre by Nexus, Inc.

Companies: Nexus Services, Inc.; Libre by Nexus, Inc.; Statewide Bonding, Inc.

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