CFPB Director Kathy Kraninger has filed her first contested lawsuit as CFPB Director. Somewhat surprisingly, the lawsuit seeks to enforce a Civil Investigative Demand (CID) issued by the CFPB in June 2017—under former Director Richard Cordray—to a debt collection law firm. The petition to enforce the CID makes clear that the respondent law firm made a “final, partial, redacted production” in response to the CID in September 2017. Clearly, therefore, this matter was pending at the CFPB throughout the year-long tenure of Mick Mulvaney, during which the agency took no action to enforce the CID. It is dangerous to read too much into this action, but it does suggest that Kraninger may take a more aggressive enforcement posture than Mulvaney, who was criticized for the sharp drop in the number of enforcement actions under his watch.
The CID at issue is a typically broad CFPB CID from that era. It contains 21 interrogatories with dozens of sub-parts, seven requests for written reports, 15 requests for documents, and, unusually, four request for “tangible things,” in this case phone recordings and associated metadata. Read as a whole, the CID seeks information regarding virtually every aspect of the respondent’s debt collection business over a period of three-and-a-half years. And the CID’s Notification of Purpose is equally broad and limitless, stating that the CFPB is investigating whether debt collectors and furnishers of information to credit bureaus have engaging in unfair, deceptive or abusive acts or practices, or have violated the Fair Debt Collection Practices Act or the Fair Credit Reporting Act, without any reference to what specific practices the CFPB was concerned about.
Based on the limited record before the Court, it does not appear that respondent challenged the sufficiency of the Notification of Purpose before the CFPB, but that is one avenue to challenge the CID given court holdings finding that such broad and non-specific Notifications of Purpose do not comply with the statutory requirement that the CID “state that nature of the conduct constituting the alleged violation being investigated.” 12 U.S.C. § 5562(c)(2). Instead, the respondent argued that because it is a law firm much of the information sought by the Bureau was either privileged or subject to non-disclosure under Rule 1.6 of the New York State Rules of Professional Conduct, in addition to raising burden arguments both regarding the requests themselves and the privilege review that would be required to comply with the CID. It will be interesting to see if the respondent argues that the CFPB’s 17-month delay in bringing this action after the respondent’s “final” production forecloses enforcement.
This is certainly an unusual choice for Kraninger’s first contested lawsuit – because of the substantive breadth of the underlying CID, the non-specificity of the Notification of Purpose, the novel arguments regarding the Rules of Professional Conduct, and, most strikingly, the agency’s delay in taking action. Time will tell if this lawsuit is a harbinger of a different enforcement philosophy or simply action on old matter taken as part of clearing out a backlog.