In a case that looks at the statutory bounds of the Consumer Financial Protection Bureau’s investigative authority, the CFPB announced that it plans to appeal a federal district court decision denying the agency’s request to enforce a civil investigative demand, or “CID”.
In August 2015, the CFPB issued a CID to the Accrediting Council for Independent Colleges and Schools, seeking information on the organization’s accreditation process for for-profit colleges. ACICS resisted the demand, filing several administrative petitions to object to the CID, arguing that the request falls outside the authority of the CFPB. The CFPB then filed a petition in federal district court, seeking an order requiring ACICS to comply with the demand.
In its April decision, the U.S. District Court for the District of Columbia agreed with ACICS and found that the CID was outside the CFPB’s authority. The court found that, although agencies are typically given broad deference in their interpretation of their authority, here the investigation into the accreditation process was too far removed from the agency’s purpose of regulating consumer financial products or services. The court wrote, “none of these laws address, regulate, or even tangentially implicate the accrediting process of for-profit colleges.” The CFPB argued that it has the authority to investigate the financial lending practices of for-profit schools, and that schools’ lending practices are evaluated as part of the accreditation process. The agency said that it was seeking to determine if any individual had engaged in unfair, deceptive, or abusive acts in connection with the accreditation process. In a strongly worded decision, the court, focusing on the language in the CID, found the CFPB’s arguments unpersuasive:
… Although it may be that the CFPB is entitled to learn whether ACICS is connected in any way to potential violations of the consumer financial laws by the schools it accredits, the statement of purpose and the CFPB’s actual requests belie any notion that its inquiry is limited in this way. Indeed, the statement of purpose says nothing about an investigation into the lending or financial-advisory practices of for-profit schools. Moreover, the CFPB’s requests … clearly reveal its investigation targets the accreditation process generally. This the CFPB was never empowered to do.
The court closed its opinion by stating, “Although it is understandable that new agencies like the CFPB will struggle to establish the exact parameters of their authority, they must be especially prudent before choosing to plow head long into fields not clearly ceded to them by Congress.”
The CFPB’s June 13 notice of appeal means that the D.C. Circuit will be given the chance to weigh in on the parameters of the CFPB’s authority. Troutman Sanders will continue to monitor the case.