On June 2, 2012, the CFPB issued its final rule for the “Rules Relating to Investigations,” (Final Rule) which describes the Bureau’s policies and procedures for conducting investigations authorized under the Dodd-Frank Act. The Final Rule primarily sets forth: (1) the CFPB’s authority to conduct investigations, (2) procedures for issuing civil investigative demands (CIDs), and (3) the rights of the parties who are being compelled by the CFPB to produce information. According to the CFPB, the Final Rule “lays out an efficient and fair process for conducting CFPB investigations.”
In the Final Rule, the CFPB claims that it is authorized under Dodd-Frank “to conduct investigations to ascertain whether any person is or has been engaged in conduct that, if proved, would constitute a violation of any provision of Federal consumer financial law.” Under the Final Rule, the Director, the Assistant Director of the Office of Enforcement, and the Deputy Assistant Directors of the Office of Enforcement are authorized to issue CIDs for documentary material, tangible things, written reports, answers to questions, or oral testimony. The Final Rule also authorizes the CFPB’s investigators to conduct investigations and hold investigational hearings pursuant to those CIDs.
The Final Rule also establishes the rights of those parties who receive CIDs and are being compelled by the CFPB to produce information. Those rights include: (1) notification of the purpose of the Bureau’s investigation, (2) access to documents or testimony provided in response to CIDs, and (3) representation by counsel at investigational hearings.
Also contained in the Final Rule are the procedures for contesting a CID by filing a petition for an order modifying or setting aside a CID. The Final Rule, however, anoints the Director, and not an independent judicial body, with the authority to rule on these petitions. This smacks of a serious conflict of interest to have the CFPB policing itself, not to mention the fact that the Director may be asked to rule on a petition challenging a CID that he personally issued. Moreover, the Final Rule only grants a party 20 days to file its petition and “disfavors” requests for extensions of time. This posturing by the CFPB not only hastens the process unnecessarily, but can severely limit the chances of cooperative resolution of any disputes over the CIDs. Instead of exploring compromise with the CFPB, companies faced with a potentially broad CID will be burdened with assessing the scope of the requests and its objections in a very limited time period and may be forced to file a petition to set aside a CID to avoid waiving its right to later object to the CID.
The Final Rule does provide some protection for parties receiving a CID. Recipients of a CID have the right to withhold certain documents under the claim of privilege. The recipient, however, is required to produce a signed schedule of the items withheld identifying each document, including: (1) the document’s specific subject matter, (2) the names, addresses, positions, and organizations of all authors and recipients of the item, and (3) the specific grounds for claiming that the item is privileged. The Final Rule provides that inadvertent disclosure of privileged or protected information or communications will not automatically operate as a waiver.
The Final Rule will take effect immediately upon publication in the Federal Register.