The CFPB filed suit against J.G. Wentworth, LLC on June 7, 2016 after the company challenged the Bureau’s expansive view of its jurisdiction.
The CFPB served a CID against J.G. Wentworth, LLC on September 11, 2015 to investigate alleged violations of consumer protection laws. J.G. Wentworth purchases structured settlements and annuities from consumers for lump sums.
J.G. Wentworth filed an administrative petition to set aside the CID as beyond the CFPB’s statutory authority. J.G. Wentworth argued that its purchase of settlements and annuities was not a consumer financial product or extension of credit subject to the CFPB’s UDAAP authority or TILA. The CFPB denied the petition to set aside, asserting that J.G. Wentworth may be providing financial advisory services to consumers in connection with offers to purchase structured settlements or annuities, which would constitute a “consumer financial product or service” subject to Dodd Frank’s UDAAP prohibition. Alternatively, the CFPB asserted that the purchases may be extensions of credit subject to the Truth in Lending Act (“TILA”). After its petition was denied, J.G. Wentworth produced some initial information to the CFPB, but ultimately refused to comply with the CID on the grounds the CFPB lacked jurisdiction over its activities.
In response, the CFPB filed a petition to enforce the CID in the Eastern District of Pennsylvania on June 7, 2016. In its memorandum filed in support of the petition, the CFPB states that the CID is within its statutory authority because it seeks to determine whether J.G. Wentworth and “persons involved in advancing funds in exchange for the rights to future payments from structured settlements or annuities have been engaged in acts or practices that violate the CFPA.” The CFPB makes no further effort to establish that the purchase of settlements and annuities constitutes a financial product or service or extension of credit.
The CFPB’s petition against J.G. Wentworth comes on the heels of a decision issued earlier this year by a D.C. federal district court dismissing a similar petition filed by the CFPB seeking to enforce a CID. In April, a D.C. federal district court ruled that the CFPB exceeded its statutory authority by issuing a CID to the Accrediting Council for Independent Colleges and Schools (ACICS). The court held that the ACICS’s accreditation process of for-profit schools, which was the focus of the CID, was not a financial product or service, and that the accreditation process had no connection to a for-profit school’s private student lending practices. Last week, on June 13, 2016, the CFPB filed a notice of appeal to the D.C. Circuit Court of Appeals.
The CFPB has consistently pushed the jurisdictional envelope by adopting broad interpretations of its statutory authority. The most aggressive and public example of the CFPB’s “jurisdictional creep” over the past several years is the Bureau’s efforts to indirectly regulate the conduct of car dealerships (which is expressly carved out from the CFPB’s jurisdiction by the Dodd-Frank Act) by applying a questionable interpretation of ECOA to impose disparate impact liability against auto finance companies.
As the CFPB continues to test the limits of its statutory authority, it will be necessary for courts to define where the CFPB’s authority ends, as the district court in D.C. did this spring and as the Eastern District of Pennsylvania now has the opportunity to do.