The Court of Appeals for the Third Circuit has affirmed a lower court’s ruling that compels a student loan servicing company to respond to a civil investigative demand letter from the Bureau of Consumer Financial Protection.
The servicer, Heartland Campus Solutions, ECSI, had refused to the comply with the CID because the BCFP was essentially seeking information on all of its business operations.
A copy of the ruling in Consumer Financial Protection Bureau v. Heartland Campus Solutions, ECSI can be accessed by clicking here.
A CID was sent to ECSI in May 2017. A meet-and-confer session was held between the two parties, during which ECSI objected to the CID. The BCFP withdrew its initial CID and subsequently filed another CID with the company. During a second meet-and-confer session, ECSI requested modifications to the request. Then, ECSI petitioned the BCFP to set aside the CID. The petition was denied and when ECSI refused to comply with the CID, the BCFP filed a motion to compel in the District Court for the Western District of Pennsylvania. The court granted the BCFP’s motion, which ECSI appealed to the Third Circuit.
In the CID, the BCFP said it is seeking:
The purpose of this investigation is to determine whether student-loan servicers or other persons, in connection with servicing of student loans, including processing payments, charging fees, transferring loans, maintaining accounts, and credit reporting, have engaged in unfair, deceptive, or abusive acts or practices in violation of §§ 1031 and 1036 of the Consumer Financial Protection Act of 2010, 12 U.S.C. §§ 5531, 5536; or have engaged in conduct that violates the Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq., and its implementing Regulation V, 12 C.F.R. Part 1022. The purpose of this investigation is also to determine whether Bureau action to obtain legal or equitable relief would be in the public interest.
ECSI said it would comply with the CID if it asked for only one of the five specific activities listed in the letter.
ECSI’s argument is that the CID is too broad and provides “no notice of what conduct is being investigated.” The Appeals Court ruled that there is nothing that limits what the BCFP can investigate, as it pertains to ECSI’s operations.
Nothing prohibits the CFPB from investigating the totality of ECSI’s business activities, and courts have previously enforced administrative subpoenas regarding conduct that is coextensive with the recipient’s business activity.
ECSI attempted to use a CID that was deemed unenforceable in the case of Consumer Financial Protection Bureau v. Accrediting Council for Independent Colleges & Schools, but the Appeals Court ruled the two situations are not comparable.
The ECSI CID includes references to specific provisions of law other than the bar on unfair and deceptive practices, and the CFPB has identified the conduct under investigation and specific statutes that may be violated.