United States: CFPB Suffers First Official CID Challenge

On April 21, 2016, Judge Richard J. Leon of the United States District Court for the District of Columbia ruled on the first judicial challenge to the Consumer Financial Protection Bureau's ("CFPB," or "Bureau") authority to issue and enforce a civil investigative demand ("CID"). The Bureau had issued to the Accrediting Council for Independent Colleges and Schools ("ACICS") a broad-ranging CID, which the respondent first challenged before the Bureau. As has been the case with all such challenges, the Director rejected the respondent's arguments and upheld the agency's issuance of the CID. ACICS then filed suit in the Federal District Court in Washington, D.C. to challenge the CID. The Court held that the CFPB did not have the authority to issue a CID regarding "the process for accrediting for-profit schools."


Procedurally, this case began on August 25, 2015, when the CFPB issued its CID to ACICS, the stated purpose of which was to "determine whether any entity or person has engaged or is engaging in unlawful acts and practices in connection with accrediting for-profit colleges. . . ."

The CID required ACICS to designate a company representative to appear and give oral testimony regarding ACICS's policies, procedures and practices relating to the accreditation of seven particular schools. This testimony would be similar to a deposition under Rule 30(b)(6) of the Federal Rules of Civil Procedure. In addition, the CID required ACICS to respond in writing to two interrogatories requesting (1) identification of every post-secondary educational institution that ACICS has accredited since January 2010, and (2) identification of all individuals affiliated with ACICS who conducted any accreditation reviews related to twenty-one specific schools since January 1, 2010.

ACICS petitioned the Bureau to set aside or modify the CID, but CFPB Director Richard Cordray denied the petition on October 8, 2015. ACICS continued to object to the CID and submitted a motion to reconsider to the CFPB, which the Bureau declined to consider. Shortly thereafter, the CFPB filed a petition for enforcement with the U.S. District Court for the District of Columbia.


Relying on legal precedent, the Court determined that the test to determine whether to enforce the CID requires due consideration of whether:

  1. The agency has the authority to make the inquiry;
  2. The information sought is reasonably relevant; and
  3. The demand is not too indefinite.1

As long as a CID that passes this test is not overly burdensome, a court should enforce it. The Court noted that its role at this stage in the proceeding is limited and further indicated its understanding that agencies are generally accorded broad deference in regard to investigative demands, their related scope of authority and the relevance of information requested.

However, the Court also noted that where it is clear that an agency lacks the authority to investigate or is seeking information irrelevant to a lawful investigatory purpose, a court must not enforce the CID. This statement foreshadowed the rest of the opinion, as the Court's analysis turned entirely on the answer to the question of whether the CFPB had authority to issue the CID.


The Court noted that that CFPB has the authority—indeed, the broad mandate—to take action to prevent a covered person or service provider from committing or engaging in an unfair, deceptive or abusive act or practice 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. Nevertheless, the Court also found that the accreditation of for-profit schools was beyond the scope of that mandate and outside the scope of the Bureau's authority:

  • [T]his case boils down to the answer to one question: Did the CFPB have the statutory authority to issue the CID in question? Unfortunately for the CFPB, the answer is no.2
  • As respondent points out, and the CFPB does not deny, none of these laws address, regulate, or even tangentially implicate the accrediting process of for-profit colleges.3

The Court further rejected the CFPB's argument that it was entitled to determine for itself the accuracy of ACICS's stated description of its accreditation process and interaction with the activities of the schools it accredits, noting that the stated purpose of the CID and its specific requests all suggest a focus on the accreditation process generally rather than that more limited focus: "Put simply, this post-hoc justification is a bridge too far!"4 The Court finally cautioned that, while it may be "understandable" for the CFPB, as a new agency, to "struggle to establish the exact parameters" of its authority, the proper course of action is to be "especially prudent before choosing to plow headlong into fields not clearly ceded to them by Congress."5


The CFPB has aggressively pursued matters that are arguably at the edge of, or just beyond, its jurisdiction, including a recent enforcement action against Dwolla, Inc., in which the Bureau used its UDAAP authority to address dataecurity concerns, an area where there has been some question as to the scope of the CFPB's authority. Accordingly, the ACICS case is significant because it represents the first time a court has ruled against the CFPB and limited the agency's jurisdiction. It is further particularly noteworthy because it comes in the context of a petition to set aside a CID, a matter of limited judicial review and one where the courts have historically given agencies wide discretion to investigate potential areas of concern. It will be interesting to see if this decision emboldens more entities to challenge the Bureau's jurisdiction.

That said, Judge Leon may have provided the Bureau with an alternative remedy. By suggesting that the Bureau "may be entitled to learn whether ACICS is connected in any way to potential violations of consumer financial laws by the schools it accredits . . . ," the Bureau may simply consider revising the CID, and its stated purpose, to a more narrowly tailored inquiry into those potential connections.

However, in light of its aggressive history, it seems unlikely that the CFPB would want to let this order stand as precedent in future actions against the Bureau around the country. Rather, the CFPB is likely to appeal the matter to the D.C. Circuit (although it certainly faced a hot bench from that court during the recent PHH oral arguments). Stay tuned for further updates.


1 See United States v. Morton Salt Co., 228 U.S. 632, 652 (1950); FTC v. Texaco, Inc., 555 F.2d 862, 872 (D.C. Cir. 1977); CFTC v. Ekasala,

2 Slip Op. 4.

3 Slip Op. p. 6.

4 Id.

5 Slip Op. p. 8.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Joe Rodriguez
Amanda J. Mollo
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions