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From Banking and Finance Law Daily, September 21, 2017

CFPB hands down decisions on two CID petitions

By Lauren Bikoff, MLS

Consumer Financial Protection Bureau Director Richard Cordray has handed down decisions on two petitions to set aside or modify a civil investigative demand. The Bureau granted in part and denied in part a petition from Synchrony Financial, and denied a petition from Heartland Campus Solutions, ECSI. In both cases, the CFPB issued CIDs to determine whether the companies have been engaging in unlawful acts or practices in violation of federal laws.

Synchrony Financial. Synchrony Financial petitioned the CFPB for an order to set aside or modify a CID. The petition was granted in part and denied in part.

In May 2017, the Bureau issued a CID to Synchrony Financial seeking information. According to the CFPB, the CID was issued to determine whether the company has engaged or is engaging in unlawful acts and practices in connection with the marketing and servicing of deferred-interest credit cards. Synchrony met with a Bureau investigator 10 days after the CID was issued, and then requested various specific modifications to the CID. On July 14, 2017, the Bureau modified the CID, making numerous changes in response to concerns about the CID and providing a staggered production schedule.

In its latest petition to the CFPB, Synchrony raised several categories of arguments as to why the CID should be set aside or modified. Synchrony argued that the Notification of Purpose is too broad and does not specify exactly the nature of the conduct constituting the alleged violation which is under investigation. Cordray rejected these arguments, stating, "The Notification of Purpose here seeks information about ‘unlawful acts and practices’ in connection with activity that the Bureau clearly has authority over, namely, ‘the marketing and servicing of deferred interest credit cards.’"

However, Synchrony argued that the Notification of Purpose does not adequately describe the provision of law applicable to such violations. Cordray stated, "The reference to ‘any other Federal consumer financial law’ is unnecessary here and, accordingly, I exercise my discretion to grant the petition, in part, and modify the CID to strike that clause of the Notification of Purpose."

The Bureau modified the Notification of Purpose, by striking that phrase, but asserted that none of Synchrony’s other arguments warrants setting aside or otherwise modifying the CID. Cordray directed Synchrony to produce all responsive documents, items, and information within its possession, custody, or control that are covered by the CID, as specified in the July 14, 2017, modification to the CID.

Heartland Campus Solutions, ECSI. Heartland Campus Solutions, ECSI, also filed a petition with the Bureau for an order to set aside or modify a CID, and requested confidential treatment of materials related to the CID. The Bureau denied ECSI’s petition and request.

The CID was issued in May 2017, and sought information about ECSI’s student loan servicing activities. After a meeting with CFPB investigators, the May 2017 CID was withdrawn and a new CID was issued on June 9, 2017, which included a revised Notification of Purpose. After another meeting with investigators, a letter was issued to ECSI that modified and clarified several items in the Notification of Purpose. On June 30, 2017, ECSI filed the petition and request.

Cordray asserted that none of ECSI’s objections "warrants setting aside or modifying the CID." In addition, in considering ECSI’s request for confidential treatment, ECSI failed to "demonstrate good cause for omitting these materials from the public record."

Therefore, ECSI is directed to produce all responsive documents, items, and information within its possession, custody, or control that are covered by the CID within 10 calendar days of the decision.

Companies: Heartland Campus Solutions, ECSI; Synchrony Financial

MainStory: TopStory CFPB EnforcementActions UDAAP

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