Adding to the growing body of cases disputing the CFPB’s authority to issue civil investigative demands (“CID”), a U.S. district court judge in the Central District of California, on May 17, rejected multiple challenges and ordered a company to comply with a CID within fifteen days of the decision. The defendant, Future Income Payments, previously attempted a John Doe challenge to the CID in the U.S. District Court for the District of Columbia. The district court rejected the challenge, and the D.C. Circuit rejected an emergency stay pending appeal. The CFPB filed a petition to enforce the CID in the Central District of California.

The opinion is a reminder of the CFPB’s broad authority to issue a CID and the heavy burden a recipient bears of challenging it. The court joined other courts in emphasizing that an agency subpoena is valid unless jurisdiction is “plainly lacking.” Under this standard, a CID will be upheld if “there is some plausible ground for jurisdiction.” The court reasoned that the defendant’s income-stream-advance product may be sufficiently similar to a loan for the CFPB to have plausible jurisdiction. The product essentially consists of an advance on a pension or other income stream, which the individual repays from the future income.

Next, the court rejected the defendant’s arguments that the CID was overbroad or unduly burdensome. The court again emphasized the CFPB’s broad investigatory powers and held that the company failed to provide “a declaration specifying the estimated cost of compliance, the effect on [the defendant’s] operations, the number of responsive documents, or some other indication of the burden of complying.” Without this information, the defendant’s assertions were not supported by evidence sufficient to carry the defendant’s burden.

Finally, the court rejected the defendant’s constitutional arguments and held that the single director, removable-for-cause structure is constitutional. The court prefaced the constitutional analysis with a reference to the doctrine of constitutional avoidance, stating that it was only addressing the constitutional question because the defendant’s other arguments lack merit.

Constitutional issues aside, the primary takeaway is that companies should think strategically when they receive a CID. For many companies, the best course of action is typically to negotiate a modification with the enforcement attorneys by discussing the scope of the investigation, providing specific examples of the burden of compliance, and finding alternative ways to provide relevant information—all done without litigation or public scrutiny. There are, of course, situations in which an acceptable compromise cannot be reached, and the Future Income case may be an example of this situation.