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CFPB Refuses To Set Aside Or Modify CID

The CFPB, in a decision and order signed by Acting Director Mulvaney, has denied the petition filed by Firstsource Advantage, LLC (Firstsource) to modify or set aside a civil investigative demand (CID) (Petition) that was issued under the leadership of former Director Cordray.  The CFPB did, however, grant Firstsource’s request to redact portions of the Petition that contained confidential supervisory information.  Acting Director Mulvaney’s decision demonstrates that despite the protestations of consumer advocates and some politicians, the CFPB under Mr. Mulvaney’s leadership is continuing to pursue investigations launched under former Director Cordray.

According to the Petition, there was “full compliance” by Firstsource  with the first CID issued by the Bureau to Firstsource in April 2017. A second CID was issued in September 2017 and contained a Notification of Purpose which stated that the CID had been issued “to determine whether debt collectors, depository institutions, or other persons have engaged or are engaging in unlawful acts and practices in connection with the collection of debt in violation of [the CFPA, the FDCPA] or any other Federal consumer financial law.”

In its Petition, Firstsource argued that the second CID should be set aside for reasons that included: (1) the FDCPA violations asserted by the Bureau are not actionable under the bona fide error rule, (2) the issuance of the CID was outside the Bureau’s Dodd-Frank authority because it had not identified (and cannot identify) any legally cognizable reason to believe Firstsource violated the FDCPA, (3) the Notification of Purpose was written in a vague and formulaic fashion, and (3) Firstsource had already produced data and documents to the Bureau.

The Bureau refused to set aside the CID, stating that “an entity’s fact-based arguments about whether it has complied with substantive provisions of the CFPA or any other enumerated consumer law, such as the FDCPA, are not valid defenses to the enforcement of a CID.”  With regard to Firstsource’s argument that the CID’s issuance was outside the Bureau’s Dodd-Frank authority, the Bureau stated that, even if Firstsource’s assertion were true, the applicable standard only requires a CID “to state the nature of the conduct constituting the alleged violation under investigation and the provision of law applicable to such violation.”  It also found that the CID’s Notification of Purpose was adequate despite its use of broad terms because it identified the conduct at issue (debt collection) and made clear that this was the conduct being investigated.

In rejecting Firstsource’s argument that it had already produced data and documents to the Bureau, the Bureau stated that Firstsource had identified “no authority that precludes a law enforcement agency from making follow-up requests for information.”

Firstsource also argued that as an alternative to setting aside the CID in its entirety, the CID should be modified for reasons that included: (1) the CID was disproportionate because it was unlikely to serve an investigatory purpose and imposed an unnecessary burden on Firstsource because the Bureau could have requested a sampling approach to the recordings of calls it requested, and (2) the requested recordings were time-barred under the FDCPA.  The CFPB rejected both of Firstsource’s arguments for why the CID was disproportionate, stating that Firstsource’s belief that it had not violated the law did not make the Bureau’s investigation improper and that Firstsource’s request for a sampling approach was untimely because it had not been made during the meet-and-confer process.

With respect to Firstsource’s argument that the requested recordings were time-barred, the Bureau stated that even assuming potential FDCPA claims were time-barred, the Notification of Purpose made clear that the Bureau was also investigating whether there had been CFPA violations which are subject to a 3-year statute of limitations that runs from discovery of the violation. Thus, the CFPA statute of limitations would not have begun to run if a CFPA violation had not yet been discovered and the Bureau was seeking the recordings to determine whether there had been a violation.

Copyright © by Ballard Spahr LLP

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About this Author

Barbara S. Mishkin, Ballard Spahr, Philadelphia, Deceptive Practices Lawyer, Fair Debt Collection Practices Act, Gramm Leach Bliley
Of Counsel

Barbara Mishkin focuses on consumer compliance and banking law. The federal laws with which Ms. Mishkin has dealt extensively include the Truth in Lending Act, Equal Credit Opportunity Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Practices Act, and Gramm-Leach-Bliley Act. She also has significant experience with state usury and lender licensing laws, as well as state laws prohibiting unfair and deceptive acts and practices.

American Bar Association, member, Consumer Financial Services Committee;...

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