The CFPB has denied the petition of a lead generation company and its employee to modify or set aside a civil investigative demand (CID). As we reported, among the petitioners’ arguments for why the CID should be set aside was that the company is neither a “service provider” nor “covered person.” They argued that the company is not a “covered person” because it does not offer or provide a “financial product or service” as defined in Dodd-Frank. They also argued that the company is not a “service provider” as defined in Dodd-Frank.
In its decision denying the petition, the CFPB stated that, as an initial matter, the petitioners waived these arguments by not raising them with the CFPB’s enforcement counsel during the meet-and-confer process. The CFPB ruled that the objection also failed on its merits because it is “essentially a substantive defense to claims the Bureau has yet to assert.” The CFPB stated that “such fact-based arguments about whether an entity is subject to or complied with a law’s substantive provisions are not defenses to the enforcement of a CID.” According to the CFPB, its position is supported by case law involving the FTC and Equal Employment Opportunity Commission indicating that an agency’s rejection of such defenses is appropriate because “the responses to a CID may be highly relevant to determining the merits of the agency’s potential claims and the parties’ defenses.” (The CFPB also cites to its own previous decision rejecting a similar objection to a CID.)
Among the petitioners’ other arguments rejected by the CFPB was their argument that the CID’s notification of purpose was insufficiently specific and thus failed to comply with the requirement that a CID state “the nature of the conduct constituting the alleged violation which is under investigation and the provision of law applicable to such violation.” The CID indicated that the CFPB was investigating “whether lead generators or other unnamed person have engaged or are engaging in unlawful acts and practices in connection with the marketing, selling, or collection of payday loans” and identified various statutes, including Sections 1031 and 1036 of Dodd-Frank, the ECOA, FCRA and GLBA. According to the CFPB, this information “adequately informed Petitioners of the conduct of interest to the Bureau and the potentially applicable provisions of law.”