Apparently undeterred by its recent loss in a case seeking to enforce a Civil Investigative Demand (CID) against a college accrediting body, earlier this week the Consumer Financial Protection Bureau (CFPB) filed another district court action seeking to enforce a CID against a company that asserts that the CFPB lacks jurisdiction over its conduct – J.G. Wentworth, LLC, which purchases structured settlements and annuity payments. See Petition to Enforce Civil Investigative Demand ("Petition"), CFPB v. J.G. Wentworth, 2:16-cv-02773-CDJ (E.D. Pa.). The case presents another example of the CFPB asserting a broad view of its jurisdiction and presents another opportunity for a court to clarify those limits and how they apply in the investigative context.
The Dodd-Frank Act gives the CFPB authority to issue CIDs in aid of its investigation of possible violations of Federal consumer financial law. 12 U.S.C. § 5562(c). Those CIDs can seek the production of documents, answers to interrogatories, written reports, and oral testimony. 12 U.S.C. § 5562(c)(1). Each CID must "state the nature of the conduct constituting the alleged violation which is under investigation and the provision of law applicable to such a violation." 12 U.S.C. § 5562(c)(2); 12 C.F.R. § 1080.5. This "Notification of Purpose" is typically extremely broad and general. If a party refuses to comply with a CID, the CFPB can petition a federal district court for its enforcement. 12 U.S.C. § 5562(e).
Earlier this year, the federal District Court in Washington, D.C. dismissed a petition filed by the CFPB seeking to enforce a CID that the agency had issued to the Accrediting Council for Independent Colleges and Schools (ACICS). Slip Op., CFPB v. ACICS, No. 15-1838 (D.D.C. April 21, 2016). That CID had indicated that the purpose of the CFPB's investigation was to determine whether any person had engaged in unlawful practices "in connection with accrediting for-profit colleges" in violation of the Dodd-Frank Act's prohibition on unfair, deceptive and abusive acts and practices (UDAAP). It had been issued to ACICS, an accrediting body. In dismissing the CFPB's petition to enforce the CID, the court found that none of the federal consumer financial laws that the CFPB is authorized to enforce "address, regulate, or even tangentially implicate the accrediting process," and that the subject matter of the investigation was beyond the agency's authority. Id. at 6. The district court rejected the CFPB's contention that because the CFPB could investigate for-profit schools for their lending activities, it could also investigate the accreditation process of those schools, noting that such an argument is "a bridge too far!" Id.
Now, the CFPB has filed another CID enforcement matter involving claims not clearly within its authority. The CID issued to J.G. Wentworth states that the purpose of the CFPB's investigation is to determine whether persons "advancing funds in exchange for the rights to future payments from structured settlements or annuities" have violated the UDAAP prohibition or the Truth in Lending Act (TILA). Petition, Exh. A. But J.G. Wentworth has argued (in seeking to administratively quash the CID) that purchasing such payment streams does not constitute a "consumer financial product or service" subject to the UDAAP prohibition or an extension of credit subject to TILA. Petition, Exh. D. That is, it argues that its activities constitute a purchase and sale, and not a loan. Id. It also notes that its activities are heavily regulated by other governmental bodies (just as the accreditation process is). Id.
In denying the administrative motion to quash the CID, the CFPB noted that J.G. Wentworth "may be providing consumers with financial advisory services to assist in determining whether a structured settlement transaction is in their best interest." Petition, Exh. E. Providing "financial advisory services" is conduct subject to the UDAAP prohibition. The CFPB offered no other example of how the company's business might subject it to that prohibition or any explanation of how TILA might apply.
It will now be for the district court to decide whether the conduct at issue is subject to the CFPB's jurisdiction. Whatever the court decides, its opinion could help further clarify both the meaning of the phrase "financial advisory services" in the Dodd-Frank Act as well as the parameters of the CFPB's investigatory authority.
Originally published on June 9, 2016
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