As any company that has received a civil investigative demand (CID) from the Consumer Financial Protection Bureau (CFPB) knows, the Bureau’s authority to issue CIDs is a powerful tool that leaves recipients with limited options to challenge or limit their compliance obligations. Recently, the CFPB has fought back against CID challenges, asking two federal district courts, to direct the target companies to show cause why they are unable to, or should not be required to, comply with the CIDs, and to issue an order enforcing the CIDs.
On November 29, 2016, the CFPB filed a petition against Harbour Portfolio Advisors, LLC (Harbour Portfolio), and related companies National Asset Advisors, LLC, and National Asset Mortgage, LLC, in Detroit federal court, seeking compliance with a CID issued on September 8, 2016. Harbour Portfolio is a private investment firm that purchases foreclosed properties in bulk and resells them as land contracts to consumers. Harbor Portfolio petitioned the CFPB in September to set aside the CID, arguing that the Bureau lacked authority over the company, because the land contracts for deeds were not consumer products, and that the scope and timeframe of the CID was unduly burdensome. Although CFPB director Richard Corday denying the petition on November 1, 2016, Harbour Portfolio and the related companies have not responded to the CID’s requests.
Meanwhile, in California, the CFPB filed a similar petition against Zero Parallel, LLC (Zero Parallel) in Los Angeles federal court on December 1, 2016, seeking compliance with a CID issued on April 25, 2016. Like Harbor Portfolio, Zero Parallel had petitioned the CFPB to set aside the CID for lack of authority, but its request was similarly denied. Following meet-and-confer sessions, the Bureau granted some of Zero Parallel’s requested to limit the information sought and extend production deadlines. Zero Parallel then made five partial productions pursuant to the amended CID, but continued to refuse to produce responsive emails. Instead, Zero Parallel claimed once again that the CFPB lacked authority to issue the CID, but nonetheless agreed to “voluntarily” produce the emails on its own schedule. Zero Parallel also agreed to make a witness available for testimony once it completed production.
In both cases, the CFPB’s arguments in support of its petitions focus on the wide latitude given to an agency while it investigates using subpoenas and the narrow standard of judicial review of the issuance of subpoenas. The CFPB noted that it can investigate fully the laws it is charged with enforcing, even if based only on a mere suspicion of violation. Additionally, the CFPB argued that it can subpoena any evidence that is not within its possession that is relevant and material to an investigation as long as it follows applicable procedural requirements for the issuance of a CID. According to the CFPB, the burden then shifts to the subpoenaed companies to prove that the CIDs are overly broad or unduly burdensome. In both cases, the courts in question have issued Orders to Show Cause, requiring Harbour Portfolio and Zero Parallel to respond with why the CFPB’s petition to enforce the CIDs should not be granted by January 13, 2017 and January 20, 2017, respectively, again underscoring the difficulty of challenging CFPB-issued CIDs.