CFPB Changes Civil Investigative Demands Policy

Mike Sorohan msorohan@mba.org

April 30, 2019


The Consumer Financial Protection Bureau last week announced Mortgage Bankers Association-supported changes to its Civil Investigative Demands policies to ensure they provide more information about the potentially wrongful conduct under investigation.

"Consistent with the updated policy, CIDs will provide more information about the potentially applicable provisions of law that may have been violated," the Bureau said in a news release. "CIDs will also typically specify the business activities subject to the Bureau's authority. In investigations where determining the extent of the Bureau's authority over the relevant activity is one of the significant purposes of the investigation, staff may specifically include that issue in the CID in the interests of further transparency."

The new policy takes into account recent court decisions about notifications of purpose, and is consistent with a 2017 report by the Bureau's Office of Inspector General that emphasized the importance of updating Office of Enforcement policies to reflect such developments.

The new policy is also consistent with comments the Bureau received, including from MBA, in response to Requests for Information it issued in 2018, seeking feedback about various aspects of its operations, including its use of CIDs in enforcement investigations.

The changes announced last week appear to mirror recommendations made by MBA in a series of responses to Bureau RFIs last year, and are articulated in the Roadmap to CFPB 2.0, released in March (https://www.mba.org/2019-press-releases/march/mba-releases-new-paper-the-roadmap-to-cfpb-20). In the April 2018 response to the RFI and in the Roadmap, MBA made the following recommendations regarding CIDs:

--Clarify the "reason to believe" standard for issuing a CID. MBA recommended establishing a standard that clearly articulates what constitutes "reason to believe" to initiate an investigation by issuing a CID.

--Provide specific notification of purpose for the CID. MBA said at a minimum, notification of purpose statements should clearly describe the specific conduct under investigation, including the relevant time period. Broad references to all consumer financial protection laws should be replaced by references to the exact statutory provisions of law alleged to have been violated.

--Petitions to modify or set aside a CID should be confidential. MBA said at a minimum, notification of purpose statements should clearly describe the specific conduct under investigation, including the relevant time period. "Broad references either to operational areas or to general consumer financial protection laws should be replaced by references to the specific conduct and the exact statutory provision of law thought to be violated."

--Timelines need to be realistic. MBA said the Bureau should adopt more flexible petition filing and meet-and-confer timelines, because in many cases, the CID will implicate information and individuals in multiple areas, and may implicate legacy computer systems no linger in use.

--Entities are entitled to know when an investigation concludes. MBA said the Bureau should provide prompt written notification when it decides to end an investigation.

"From the perspective of regulated entities, receipt of a CID frequently marks the beginning of an expensive, uncertain process of indeterminable duration," MBA said. "CIDs share many of the consequences of a formal legal action--legal costs, reputational harm, business disruption--but offer few of the protections. In this way, CIDs represent a significant burden."

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