Federal Court: CFPB Lacked Jurisdiction to Issue CID
The U.S. District Court for the District of Columbia on April 21, 2016 found that the Consumer Financial Protection Bureau (CFPB) did not have authority to issue a Civil Investigation Demand (CID) in an investigation aimed at business practices that did not involve a consumer financial product or service. The court announced this finding in its ruling that the CFPB did not have the authority to issue a CID to the Accrediting Council for Independent Colleges and Schools (ACICS).
In 2015, the CFPB issued a CID to ACICS, an accreditor of for-profit colleges. The stated purpose of the CID was to investigate whether any entity has or is violating federal consumer protection laws in connection with accrediting for-profit colleges. ACICS refused to comply with the CID and submitted a petition to the CFPB to set aside the CID. CFCB Director Richard Cordray denied the ACICS petition, and when ACICS continued to refuse to comply, the CFPB brought suit in federal district court to enforce the CID.
The court denied the CFPB's petition, dismissing the argument that the CFPB's authority to investigate private colleges' lending practices extended to the accreditation process. The court also dismissed the CFPB's argument that it is entitled to investigate and determine for itself whether or not ACICS is engaged in accreditation activities that lie outside of the CFPB's jurisdiction. For a greater discussion of this ruling and its backdrop, please see Holland & Knight’s client alert.
This decision is the first time the CFPB's enforcement authority has been reined in by a court, and it follow the oral argument in the U.S. Court of Appeals for the D.C. Circuit earlier this month, during which the constitutionality of the Bureau was questioned.
Consumer Financial Protection Bureau v. Accrediting Council for Independent Colleges and Schools, Civil Case No. 15-1838 (D.D.C. April 21, 2016)