The CFPB has refused to modify or set aside a civil investigative demand (CID) issued to Next Generation in connection with an investigation of the company’s debt settlement services business.
In its decision and order denying Next Generation’s petition to modify or set aside the CID, the CFPB stated that the petition was denied because it was not filed within 20 calendar days of service of the CID as required by CFPB rules. Compounding the untimeliness of the petition, according to the CFPB, was the company’s failure to make any attempt to meet and confer with the CFPB prior to filing the petition. CFPB rules generally require a CID recipient to meet and confer with a Bureau investigator within 10 calendar days after receipt of a CID and provide that the CFPB will not consider a petition unless the CID recipient “has meaningfully engaged” in the meet and confer process. According to the CFPB’s order, Next Generation did not ask the CFPB to waive those requirements.
The CFPB’s order also found that even if the company had complied with CFPB rules, the petition had no merit because it asserted substantive defenses to the CFPB’s anticipated charges. The CFPB stated that facts relating to whether a company is covered by or has violated a federal consumer financial protection law are not valid defenses to a CID.
The Next Generation order underscores several important points about dealing with CIDs from the CFPB. First, compliance with the 20-day petition deadline is obviously critical. Second, the CFPB continues to emphasize the importance of meaningful participation in the “meet and confer” process, which we believe is one of the key factors in handling CIDs from the CFPB. And third, the CFPB is again communicating that arguments about the merits of an investigation will not be persuasive in the context of deciding the appropriate scope of a CID.
Based on our experience representing clients that have received CIDs from the CFPB, we believe that the best strategy in limiting a CID’s scope is to demonstrate the cost involved in responding to each request and to suggest alternatives that will be less costly and still provide the CFPB with the information it needs.