The Consumer Financial Protection Bureau (CFPB) recently announced that it is adopting a new policy regarding Civil Investigative Demands (CIDs). Going forward, Director Kathleen Kraninger has committed to providing more information to the entity or individual that is the recipient of the CID. This will be accomplished through more specific notifications of purpose, which will explain the potential provisions of law that the CFPB believes may have been violated. While the CFPB did not include in its announcement how or when this new policy would become effective, the CFPB’s recent orders in response to numerous petitions to modify or set aside CIDs provide tangible insight into what the new approach will look like going forward.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires that when the CFPB issues a CID it must “state the nature of the conduct constituting the alleged violation which is under investigation and the provision of law applicable to such violation.” This is accomplished through the notification of purpose section of the CID. However, the CFPB has historically provided generic, broad and vague notifications of purpose, and that practice has come under scrutiny. In response to one of the 12 requests for information (RFIs) that were issued by then-Acting Director Mick Mulvaney, the CFPB received numerous comments suggesting that it should provide more detail and direction regarding what it is investigating when a CID is issued. Director Kraninger’s new policy, which was announced on April 23, 2019, is at least partially driven by the comments it received in response to the Mulvaney RFIs.
Just a few weeks after the new policy was announced, Director Kraninger quietly gave five examples of how the CFPB will provide more detailed notifications of purpose under the new policy. This was done without any fanfare, press releases or announcements. The CFPB, as it has always done, publishes the decisions that are made in response to a CID recipient’s petition to modify or set aside the CID on its public website. On May 9, 2019, five new decisions were published, and all five contain substantial modifications to the notifications of purpose that were contained in the petitioners’ CIDs.
Consistent with the new policy announcement, each modified notification of purpose contains much more detail than the original version. For example, one of the original notifications of purpose implicated potential violations of the Fair Credit Reporting Act (FCRA) by saying:
The purpose of this investigation is to determine whether student loan debt-relief providers, mortgage lenders, or other persons . . . have violated the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.
The original notification of purpose does not specify any actual conduct that may violate the FCRA, and it also cites to the entirety of the FCRA as potentially being violated. In contrast, under the CFPB’s new CID policy, the portion of the modified version of the notification of purpose related to potential FCRA violations now says:
The purpose of this investigation is to determine whether student loan debt-relief providers, mortgage originators, or associated persons . . . have obtained or used consumer reports without a permissible purpose in a manner that violates the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., principally § 1681b.
This provides much more detail into both the conduct at issue, and the specific provisions of the FCRA that are being looked at. Similar enhancements were made to the CIDs of the other four petitioners as well. This shift in policy will greatly benefit recipients of a CFPB CID in the future.
Another interesting observation regarding the CFPB’s recent orders is that the CFPB proactively modified the notification of purpose section of CIDs for two petitioners who didn’t object to the broad nature of the original version. Director Kraninger simply cited the CFPB’s recent policy announcement and then provided a new notification of purpose that is consistent with that policy. Although none of the five petitions to modify or set aside a CID were fully granted, having more detail in the CFPB’s notification of purpose and having a better understanding of where the investigation may be headed is a major win for industry.