On April 21, 2016, a federal district court for the first time issued an order quashing a civil investigative demand issued by the Consumer Financial Protection Bureau (the CFPB). In ruling on the case, CFPB v. Accrediting Council for Independent Colleges and Schools, Case No. 1:15-cv-01838 RJL (D.D.C.), the U.S. District Court for the District of Columbia held that the CFPB exceeded its authority to issue the CID to an organization that accredits for-profit colleges. Specifically, the Court held that the CFPB’s undisputed authority to investigate for-profit colleges with respect to their private student lending and financial advisory services does not extend to investigating the process for accrediting for-profit colleges. Specifically, the Court held that the “accreditation process simply has no connection to a school’s private student lending practices,” particularly as the accrediting organization was “not involved in the financial aid decisions of the schools it accredits.”
Notably, the Court concluded its ruling with the following admonition for the CFPB, which heretofore has been particularly aggressive in asserting its jurisdiction over a variety of industries not squarely covered by the Dodd-Frank Act: “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 a field not clearly ceded to them by Congress.” It is unclear whether the CFPB will heed this admonition and be chastened by the Court’s ruling. Regardless, this ruling represents a rare and important victory for the industry as it seeks to push back on the CFPB.