Consumer advocates have heavily criticized Director Kraninger and former Acting Director Mick Mulvaney for taking a much less aggressive attitude towards enforcement than former Director Cordray.  While there are fewer lawsuits and consent orders under the Kraninger/Mulvaney leadership than under the Cordray leadership, the CFPB’s enforcement activities are still quite robust as exemplified by the five decisions and orders issued by Director Kraninger on April 25 in which she, with minor changes, strictly enforced five separate CFPB civil investigative demands (CIDs).  These decisions and orders largely flew under the radar until Jeff Ehrlich, CFPB Deputy Enforcement Director, mentioned them on May 20 in Chicago when he spoke at the PLI 24th Annual Consumer Financial Services Institute, which I co-chaired.

On April 23, the CFPB announced that in an effort to provide more transparency to CID recipients, it would provide more specific information in CID notifications of purpose.  Director Kraninger’s April 25th decisions and orders granted those petitions to modify or set aside the CIDs that included a challenge to the sufficiency of the CID’s notification of purpose but only as to that challenge.  (Her decisions and orders modify the notifications consistent with the Bureau’s April 23rd announcement.)  However, Director Kraninger denied those petitions as to all other challenges and fully denied the petitions that did not include such a challenge.

The five decisions and orders consist of the following:

• In re Fastbucks

  • The CID’s original notification of purpose stated that the CID had been issued “to determine whether small-dollar lenders or other persons (1) in connection with the advertising, marketing, offering, provision, servicing, documentation or collection of loan applications or loans have engaged in unfair, deceptive or abusive practices in violation of [the CFPA] or have violated the [ECOA] or the [FCRA], or (2) in connection with maintaining records or providing information for a Bureau investigation have violated [sections 1031 and 1036 of the CFPA].

  • The modified notification states that the purpose of the investigation “is to determine whether small-dollar lenders or associated persons, in connection with  extending or servicing small-dollar loans or collecting debts, have (1) made harassing debt-collection calls to consumers’ workplaces in a manner that is unfair, deceptive, or abusive in violation of [the CFPA] (2) failed to maintain and preserve records in a manner that violates [Reg. B, principally section 1002.12]; (3) failed to follow the requirements for providing disclosures to consumers in a manner that violates the [FCRA, principally sections 1681g, 1681m]; or (4) failed to maintain records or failed to provide information to the Bureau in connection with a Bureau examination in a manner that violates Section 1036(a)(2) of the CFPA.”

  • Prior to the issuance of the CIDs, a Bureau enforcement attorney sent direct messages to Fastbucks’s owner via social media that primarily concerned a state enforcement action against Fastbucks that the enforcement attorney worked on prior to his Bureau employment, when he was employed by the state’s Attorney General’s office. Even though the attorney did not work on the Bureau’s investigation of Fastbucks, the company argued that the messages, which it characterized as harassing and taunting, showed that the CIDs were issued for an improper purpose.  Director Kraninger rejected this argument, stating that the CIDs “have been subject to multiple levels of review within the Bureau…that have ensured they were issued for a proper purpose and in accordance with all applicable regulations.”

  • Even though Fastbucks had not challenged the sufficiency of the CID’s notification of purpose, Director Kraninger modified the notification as set forth above.

• In re Kern-Fuller and Sutter

  • The CID’s original notification of purpose stated that the CID had been issued “to determine whether persons that purport to acquire the rights to veterans’ military pensions or other benefits in exchange for lump-sums are offering to extend credit or extending credit. The purpose of this investigation is also to determine whether, in connection with the offering or collecting on these products, such persons have engaged in unfair, deceptive, or abusive acts or practices in violation of [sections 1031 and 1036 of the CFPA].”

  • The modified notification states that the purpose of the investigation “is to determine whether persons that purport to acquire the rights to veterans’ military pensions or other benefits in exchange for lump-sums are offering to extend credit or extending credit. The purpose of this investigation is also to determine whether such persons, in connection with the offering or collecting on these products, have made false or misleading representations to consumers or have failed to disclose to consumers the applicable interest rate on the credit offer, in a manner that is unfair, deceptive, or abusive in violations of Sections 1031 and 1036 of the [CFPA].”

  • Director Kraninger rejected the petitioners’ argument that the CIDs should be set aside because the CFPB is unconstitutional, stating that the “Bureau has consistently maintained that its statutory structure is constitutional under controlling Supreme Court precedents.”   She also rejected their argument that because they are attorneys, the CIDs should be modified to protect attorney-client privileged information and attorney work product.  She concluded that modification of the CIDs was unnecessary because “the CFPA and the Bureau’s rules already provide an orderly procedure for asserting privilege during the giving of oral testimony in response to a CID.” Director Kraninger stated that while the petitioners “are entitled to raise appropriate privilege objections while testifying, in conformance with the procedures provided by the CFPA and the Bureau’s rules, their premature assertion of privilege provides no grounds for setting aside the CID itself.”

• In re Amy Plummer

  • Ms. Plummer, who worked in an administrative support position for petitioners Kern-Fuller and Sutter, received a CID with the same original notification of purpose as the CIDs received by those petitioners.  Even though Ms. Plummer had not challenged the sufficiency of the notification of purpose, the decision and order denying her petition modified the notification in the same manner as the notification in the Kern-Fuller/Sutter CIDs.

  • Director Kraninger rejected Ms. Plummer’s argument that the petition should be set aside because it exceeded the Bureau’s authority over the practice of law and because it improperly sought attorney-client privileged information and attorney work product.  She found that Ms. Plummer’s first argument ignored language in the CFPA that a person whose activities are otherwise excluded from the CFPB’s supervisory and enforcement authority can still be subject to requests to CIDs issued by the Bureau “in the course of carrying out its responsibilities to enforce the federal consumer financial laws.” Ms. Plummer’s second argument was rejected on the same grounds as the similar argument made by petitioners Kern-Fuller and Sutter.

• In re Fair Collections and Outsourcing, Inc.

  • The CID’s original notification of purpose stated that the CID had been issued “to determine whether debt collectors or other unnamed persons have engaged in, or are engaging in, unlawful acts or practices in connection with the collection and reporting of consumer debts in violation of the [FDCPA], the [FCRA], [the regulations concerning the Duties of Furnishers of Information to Consumer Reporting Agencies], or any other federal consumer financial law.”

  • The modified notification states that the purpose of the investigation “is to determine whether debt collectors or associated persons, in connection with the collection and reporting of consumer debts, have: (1) made false or misleading representations in a manner that violates the [FDCPA], principally section 1692e; (2) failed to perform the duties of a furnisher of information to consumer reporting agencies, including by failing to establish reasonable policies and procedures concerning the accuracy and integrity of furnished information or to conduct appropriate investigations of disputes, in a manner that violates the [FCRA], principally section 1681s-2, or [Reg. V], principally Subpart E; or (3) thereby also violated Section 1036(a)(2) of the [CFPA].”

  • Director Kraninger rejected the petitioner’s  argument that the petition should be set aside for the same reason as set forth in her decision and order regarding petitioners Kern-Fuller and Sutter.  She also rejected the petitioner’s argument that the Bureau’s overall investigation had been fundamentally unfair because it did not have enough time to comply with past CIDs, the Bureau’s document submission standards were overly demanding, and the CIDs were issued after Enforcement had indicated that the petitioner could be the subject of a public enforcement action and after discussing the possibility of settlement.  With regard to the last argument, Director Kraninger stated that the petitioner had not shown that the CID was issued for an improper purpose or in bad faith because it had failed to provide “any statutory or other restriction on the Bureau’s ability to issue a CID after an enforcement action is authorized but not filed” or to “explain why it would be improper for the Bureau to issue a CID to obtain additional evidence before authorizing an enforcement action.”

• In re Jawat Nesheiwat

  • The CID’s original notification of purpose stated that the CID had been issued “to determine whether student loan debt-relief providers, mortgage lenders, or other persons, in connection with obtaining, using, or disclosing consumer information or with marketing or selling products and services relating to student loan consolidations, repayment plans, and forgiveness plans, have engaged in unfair, deceptive, or abusive acts or practices in violation of sections 1031 and 1036 of the [CFPA]; or have violated the [FCRA] or the Telemarketing Sales Rule.”

  • The modified notification states that the purpose of the investigation “is to determine whether student loan debt-relief providers, mortgage originators, or associated persons, in connection with obtaining, using, or disclosing consumer information or with marketing or selling products and services relating to student loan consolidations, repayment plans, and forgiveness plans, have: made false or misleading representations to consumers in a manner that is unfair, deceptive, or abusive  in violation of sections 1031 and 1036 of the [CFPA]; or have obtained or used consumer reports without a permissible purpose in a manner that violates the [FCRA]; or have made false or misleading representations to consumers or requested or received prohibited payments from consumers in a manner that violates the Telemarketing Sales Rule.”

  • Director Kraninger denied Mr. Nesheiwat’s request for the redaction of his name from all public materials concerning his petition because he had failed to “articulate any argument why his name would be protected from disclosure under FOIA,” and had not “clearly identif[ied] any harm he would suffer from disclosure.”