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On June 6, 2012 the Consumer Financial Protection Bureau
(the "Bureau") issued a final rule providing more on
their investigative procedures. Codified in Section 1080, the rules
have only further delineated the practices and processes already in
use by the Bureau. Yet, the regulations provide further structure
and clarity to the Bureau's intended investigation
procedures.
As noted in an earlier posting, the final investigation and
adjudication rules are modeled heavily after those presently
employed by the Federal Trade Commission ("the FTC").
Yet, the Bureau also reviewed the guidelines of other law
enforcement agencies. The Director, Assistant Director, and the
Deputy Assistant Director of the Office of Enforcement ("the
Bureau leadership") are authorized to issue civil
investigative demands (CID's). This authority is
non-delegable. The Bureau has broad authority to request
documentary material, tangible things, electronically stored
material, written reports, answers to questions, or oral testimony
from the target of an investigation pursuant to the investigative
demands. Each type of evidentiary material is outlined and defined
in the final rule. Additionally, the Bureau leadership has broad
power to modify CID's, to extend time (although disfavored) in
order to cooperate with the parties.
In addition to outlining the Bureau's authorities and the
specific items that can be demanded, the rule also sets forth the
rights of the persons being investigated. In particular, the
Bureau must provide notification that includes both the conduct
constituting the alleged violation and the specific laws that were
potentially violated. Bureau investigators then proceed with the
investigation.
Parties have the opportunity to express their concerns with the
CID during the meet and confer session. Personnel with the
necessary knowledge of the issues in the CID must meet with the
Bureau investigator within 10 days after receipt of the CID or
before the deadline for filing a petition for an order to modify or
set aside the demand ("petition"). This meeting can
occur in person or over the phone. While the final rule gives
the Assistant Director or the Deputy Assistant Director the
authority to waive this session, parties cannot file a petition
unless they "meaningfully engage" in this process.
Moreover, only issues raised during the meet and confer process can
be challenged later.
The final rule also details the procedures for filing a
petition. Within twenty days of the receipt of the CID, or
before the deadline for responding if less than twenty days, the
parties can send a petition setting forth all of their legal and
factual objections along with any supporting materials. A
petition must be accompanied by a statement from counsel
acknowledging that they attempted to work with the Bureau to
resolve the issues informally. The final decision resides with the
Director, but Bureau investigators can provide the Director with a
response to the petition, without notifying or serving the
party.
Parties have the right to access the information provided to the
Bureau and to have legal counsel at investigative hearings.
Investigative hearings are not governed by the rules of evidence
and counsel is only permitted to raise an objection or advise a
witness in order to protect a constitutional or other legal right
or privilege. However, an investigation target's counsel
can raise objections before the investigative hearing in a brief
and can request to ask the witness follow up questions at the
completion of their testimony. Again, this process is very
similar to the role of counsel permitted at FTC hearings.
Lastly, the final rule gives the Bureau the ability to initiate
actions to enforce compliance with a CID and/or to prosecute
violations. The Director, Assistant Director, and General
Counsel are authorized to initiate enforcement proceedings or seek
civil contempt for failure to comply. Moreover, if a violation
seems credible, the same parties can initiate the Bureau's
administrative adjudicatory processes, initiate federal or state
court actions, or refer the investigation to other federal, state,
or foreign agencies.
In the end, the Bureau leadership has been given broad authority
to investigate and, when necessary, prosecute violations of the
consumer protection statutes. These final rules should not come as
a surprise to those who have been working with the Bureau thus far,
both because these rules are modeled after other administrative
agencies and because they simply officially codify the policies and
procedures that are presently in use.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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