The CFPB has issued an order denying the petition filed by CheckSmart Financial Company in September 2013 to modify or set aside a civil investigative demand (CID) it received from the CFPB. 

As we previously reported, the petition stated that the CID was issued in connection with a nonpublic investigation launched by the CFPB “to determine whether payday lenders, check cashers, their affiliates, or other unnamed persons have been or are engaging in unlawful acts or practices in connection with the origination of payday loans and the cashing of payday loan proceeds” in violation of the Consumer Financial Protection Act (CFPA).  

Among other objections, CheckSmart asserted that the CID was overbroad because it sought information unrelated to originating payday loans and cashing proceeds checks.  Specifically, CheckSmart argued that the CID should be limited to its Ohio operations because it only issued loan proceeds in the form of money orders in Ohio and in all other states it issued proceeds in cash only (which could be converted to a money order at the customer’s request).  In November 2013, based on CheckSmart’s written declaration, the CFPB determined that “storefronts not based in the state of Ohio are not within the intended scope of the CID” and agreed to modify the CID to require responses relating only to CheckSmart’s Ohio locations.   

The CFPB’s January 22 order rejected all of CheckSmart’s other objections to the CID (with several objections declared moot as a result of the modification of the CID’s scope or waived because CheckSmart did not raise them in the “meet-and-confer” process established by the CFPB’s rule relating to investigations). 

With regard to the CheckSmart’s objection that the CID demanded materials pre-dating
July 21, 2011, the Dodd-Frank designated transfer date, the CFPB indicated that the CID was intended to discover not only whether CheckSmart’s actions violated CFPA provisions (Dodd-Frank Title 10), but also whether any other provision of federal consumer financial law was violated.  According to the CFPB, “[t]he factual premise of CheckSmart’s objection-that the Bureau is seeking material that predates the effective date of the relevant provision of substantive law-is, therefore, incorrect.”  The CFPB also indicated that even if conduct pre-dating the designated transfer date was not actionable, information concerning CheckSmart’s practices prior to that date “may assist Enforcement in evaluating CheckSmart’s knowledge of, and intent to comply or not comply with, applicable legal provisions governing those activities conducted after July 21, 2011.  In addition, this information may provide important background about the initial design and implementation of CheckSmart’s potentially actionable activities.” 

While CheckSmart’s petition was denied, it obtained a very substantial narrowing of the CID in advance of the CFPB decision.  This is consistent with our experience that the CFPB is willing to work with CID recipients who proffer reasonable arguments that a CID is overbroad.