Nothing 'Inappropriate' to See Here. CFPB Defends Going to State Regulators As Court Stalls Subpoena
In a court filing earlier this month, pension advance provider Future Income Payments said the CFPB was demanding information from state authorities that the company provided “generally under confidentiality restrictions.”
August 17, 2017 at 01:24 PM
4 minute read
The Consumer Financial Protection Bureau on Wednesday defended its authority to request records about a company from state regulators even as a federal appeals court blocks an agency subpoena demanding records from the targeted business.
In a court filing earlier this month, pension advance provider Future Income Payments said the CFPB was demanding information from state authorities that the company provided “generally under confidentiality restrictions.” The California-based firm, which provides consumers with lump sum payments in exchange for all or a portion of their future pensions, said the CFPB was seeking “confidential and sensitive information” in spite of a ruling by the U.S. Court of Appeals for the Ninth Circuit that stayed a federal district judge's decision ordering Future Income Payments to respond to the bureau's subpoena.
The company's latest brief, filed Aug. 2 in separate litigation before the U.S. District Court for the District of Columbia, said the CFPB knew Future Income Payments “voluntarily produced sensitive and confidential information to various state agencies”—typically under an explicit confidentiality agreement or under the protection of state law—as part of its cooperation with those agencies' investigations. The CFPB, according to the brief, sought records from at least one agency: the North Carolina Department of Justice.
Future Income Payments—represented by Dorsey & Whitney and Womble Carlyle Sandridge & Rice—did not explicitly criticize the agency's continued investigative efforts as improper. Instead, it sought to make the case for allowing the company to contest the constitutionality of the CFPB's independent, single-director structure in a Washington, D.C., federal district court, where the bureau has argued it should be “precluded from seeking to relitigate the very same issue” it raised fighting the subpoena in the U.S. District Court for the Central District of California.
For the CFPB, the subtext of Future Income Payments' brief was clear. In a footnote on the final page of its response Wednesday, the CFPB said Future Income Payments “implies that it would be somehow inappropriate for the bureau to gather information about the company from other regulators in light of the Ninth Circuit's stay.”
“[Future Income Payments] is mistaken,” wrote the CFPB's general counsel, Mary McLeod, and two other attorneys in her office. “The Ninth Circuit did not 'stay' any action by the bureau. Rather, the Ninth Circuit stayed—but did not vacate or otherwise disturb—the district court's order that FIP produce documents and other information to the bureau.”
In that district court order, Judge Josephine Staton upheld the CFPB's structure as constitutional and ruled that, “even if the agency were unconstitutionally structured, the enforcement of a subpoena issued by the agency would not be unconstitutional.”
A day after Staton handed down that decision, an assistant U.S. attorney in the Los Angeles area stepped down as the CFPB's local counsel in the case—the first in a string of withdrawals tied to the U.S. Department of Justice's decision to abandon its earlier defense of the bureau's structure.
The CFPB's record enforcing investigative demands has been mixed. In February, a federal district judge in Detroit ordered Harbour Portfolio Advisors—an investment firm that purchased foreclosed properties in bulk and resold them through high-interest installment contracts known as “contracts for deed”—to comply with a CFPB subpoena.
But the CFPB has occasionally been forced to back down.
In June, nearly a year after suing financial services company J.G. Wentworth over its refusal to cooperate with an investigation, the CFPB withdrew its subpoena. And in April, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit upheld a lower court decision striking down a subpoena the CFPB issued to the Accrediting Council for Independent Colleges and Schools, an organization that has been cited for lax oversight of for-profit schools including the now-shuttered Corinthian Colleges chain.
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