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Financial Services Law Insights and Observations

District Court compels college operator to testify in CFPB CID challenge

Courts CFPB CIDs Enforcement CFPA UDAAP


On April 20, a magistrate judge for the U.S. District Court for the District of Utah issued a report and recommendation in a CFPB action seeking to compel testimony from a private, non-profit operator of several colleges as part of its petition to enforce a 2019 civil investigative demand (CID). The CID seeks information about (i) the operator’s private student loan program to determine whether its private financing program violated federal consumer financial laws; and (ii) litigation involving the operator’s student loan program in which it has been a party in since 2012. The CID also sought testimony for what it said was an investigation into whether the operator had misled student borrowers about the offered loans or signed them up for loans without their knowledge or consent—a potential UDAAP violation. Former Bureau Director Kathleen Kraninger previously denied a petition to set aside the CID (and ultimately ratified its enforcement), but offered to narrow the CID’s scope to only require testimony regarding the first of these topics on the condition that the operator would testify as scheduled. The Bureau filed a petition to enforce the CID after the operator failed to comply. The operator challenged the Bureau’s single-director structure (which was addressed in rulings issued by the U.S. Supreme Court in Seila Law v. CFPB and Collins v. Yellen, covered by a Buckley Special Alert here and InfoBytes here), and argued, among other things, that the CID was “overly broad” and “burdensome.”

The magistrate judge rejected the majority of the operator’s arguments, which included constitutional arguments, lack of relevance, abuse of process, and that the demand is too indefinite, overly broad and burdensome. The magistrate judge concluded that enforcing the compromise offered by the Bureau back in 2019 would be an equitable solution and give the agency the necessary information without imposing undue burden, explaining that the defendant “has now had multiple years to prepare witnesses for deposition and should not be unduly burdened to answer questions regarding its own private-student-loan program.”