The civil investigative demand (or “CID”) is a powerful tool that various agencies of the federal government can use to collect information about the targets of their investigations. One agency that is well known for its extensive use of civil investigative demands is the Consumer Finance Protection Board (CFPB), which is responsible for monitoring consumer-level transactions within the United States’ financial services industry.
Although the scope CFPB’s authority may be limited in terms of industry focus, its investigative powers are extraordinarily broad. Under federal law, the CFPB is empowered to investigate any matter involving “an unfair, deceptive, or abusive act or practice under Federal law in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service.” This includes not only traditional financial transactions (such as bank loans and mortgages), but credit transactions for health care services and other consumer-level offerings as well.
What Individuals and Companies Need to Know about Civil Investigative Demands
Due to the severe penalties that exist under federal law for civil infractions involving consumer fraud, health care fraud, and related offenses, any individual or company that has received a civil investigative demand from the CFPB must take its situation very seriously. Here are seven things you must know if you have been served with a civil investigative demand from the CFPB.
1. You Might Be the Target of a Federal Investigation
Upon receiving a civil investigative demand, one of the first critical steps is to determine if you are under investigation or if the demand is seeking information in relation to the CFPB’s investigation of a third party. Although the targets of CFPB investigations frequently receive civil investigative demands, the CFPB can issue demands to other individuals and entities with “potentially relevant” information as well; and your response strategy will need to be tailored to the nature of the government’s inquiry.
If you or your company is being targeted in the CFPB’s investigation, you will need to prepare your response with your overall defense strategy in mind. If at all possible, you want to resolve your investigation without facing charges, and this means carefully balancing your cooperation with the CFPB with staunch assertion of your legal rights.
2. The CFPB Investigates “Unfair, Deceptive, [and] Abusive” Practices
Regardless of whether you are the target of the CFPB’s investigation, in order to respond to your civil investigative demand appropriately (and avoid the penalties that can flow from a deficient response), it is important to understand when and why the CFPB conducts civil investigations. As noted above, the CFPB has jurisdiction over “unfair, deceptive, [and] abusive act[s]” involving consumer financial products and services. An act or practice involving a consumer financial transaction is considered “unfair” if:
“[T]he act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers; and such substantial injury is not outweighed by countervailing benefits to consumers or to competition.”
An act or practice is considered “abusive” if it:
“[M]aterially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or takes unreasonable advantage of (A) a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service; (B) the inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service; or (C) the reasonable reliance by the consumer on a covered person to act in the interests of the consumer.”
With this broad statutory language (note that the law does not specifically define, “deceptive”), the CFPB routinely investigates a wide range of entities for a wide range of alleged civil offenses. Understanding the allegations underlying an investigation is critical to formulating an appropriate response.
3. You Must “Meet and Confer” with CFPB Personnel within 10 Days
When you receive a civil investigative demand from the CFPB, there are two very short deadlines of which you need to be aware. The first is the 10-day deadline to “meet and confer” with CFPB personnel. Although mandatory, the “meet and confer” process can also be used strategically to gain insight into the CFPB’s investigation. For example, during this initial meeting with CFPB personnel, it may be possible to:
- Open a constructive dialogue that facilitates ongoing discussions and limits confrontations that can lead to unnecessary challenges with regard to the CID response and the CFPB’s overall investigation.
- Gain critical insights into the allegations underlying the CFPB’s investigation and any other investigative efforts that may be ongoing or that may have previously concluded.
- Gather other insights and information to create the best and most-strategic approach in responding to the CID and avoiding further government inquiry.
- Explore any potential grounds to limit the scope of the CID, either informally with CFPB staff or by filing a petition in federal court.
4. You Must Decide Whether to Challenge the Civil Investigative Demand within 20 Days
The second deadline that comes up after being served with a civil investigative demand is the deadline to file a petition to modify or set aside the demand. If you fail to file a petition within 20 days, you will waive your right to challenge the scope of the CID. This is true even if you are in informal discussions with CFPB personnel on the date that the 20-day filing window expires.
The grounds for challenging a CID are limited, and the first level of review is with the CFPB Director. In addition, federal judges tend to defer to agency personnel when assessing the reasonableness of investigative demands. As a result, while filing a petition is an option (and not one to be discarded without careful consideration), the better approach is often to work cooperatively with the CFPB’s attorneys and investigators. However, even if a negotiated modification appears to be imminent, it may still be necessary to file a petition in order to preserve your rights pending the finalization of the modification.
5. In the Meantime, You Must Implement a Legal Hold
When you receive a civil investigative demand, you must accomplish several parallel tasks. While preparing for the initial “meet and confer” and evaluating your options for challenging the CID, you also need to make sure that you are taking appropriate measures to implement an adequate “legal hold.” This involves preserving all records (both hard-copy and electronic) that are potentially responsive to the CID, which may include emails, working files, internal policies and memoranda, customer records, and any other records that are related even tangentially to the CFPB’s investigation. At the entity level, company executives, in-house counsel, and information technology (IT) personnel should all work closely with litigation counsel to ensure that the necessary records are being preserved.
6. You Must “Certify” Your CID Response
When you submit your response to the CFPB, you will be required to certify that the response is accurate and complete to the best of your knowledge based upon a reasonable investigation. When a response is inaccurate or incomplete, the CFPB can seek remedies, including asking a court to hold the CID recipient in civil contempt. While the CFPB may require a single certification, it will often be best to obtain individual certifications from each employee involved in preparing the response. These individuals should be clearly advised of their obligations and the consequences of non-compliance so that they can accurately represent that their portion of the response is ready for submission to the CFPB.
7. Don’t Expect to Receive an Extension
Despite the extraordinary amount of information often sought in civil investigative demands, extensions from the CFPB are rare. Absent a specific and demonstrable objection to the response deadline, a CID recipient must generally be prepared to submit its response no later than the deadline stated in the demand. As a result, ideally, companies that fall within the CFPB’s jurisdiction will have a proactive CID response plan in place. But, if you are taken by surprise and forced to scramble to meet the CFPB’s demands, know that you may need to take extraordinary measures in order to comply.
At The Criminal Defense Firm, we offer decades of federal government and private practice experience for helping health care providers and other entities comply with civil investigative demands from the CFPB. Our attorneys can communicate with CFPB personnel on your behalf, and we can help you take all actions necessary to respond appropriately and mitigate your risk of civil liability. In order to allow us to protect your interests as thoroughly as possible, it is important that you contact us promptly. To schedule a free initial assessment, please call or send us a message online today.
Contact the Federal Defense Attorneys at The Criminal Defense Firm
If you or someone within your organization has been served with a civil investigative demand from the CFPB, we encourage you to contact us immediately to discuss your response. For a free initial assessment, call our offices nationwide at (888) 452-2503, or request to speak with an attorney online now.
Dr. Nick Oberheiden is a national litigation and trial criminal defense attorney who practices exclusively in the area of federal law.