The High Costs and Consequences of a CFPB CID

Consumer Finance   |   July 8, 2014
Download Download   
Share Share Page

Dodd-Frank gives the Consumer Financial Protection Bureau (CFPB) the power to enforce and implement federal consumer financial protection laws, including home mortgage and other consumer credit regulations, plus powerful tools to investigate potential violations of those laws. These tools include informal requests for information as part of its examination and supervisory functions, subpoenas for testimony or documents, and the civil investigative demand (CID).

Before initiating any proceeding under a federal consumer financial law, Dodd-Frank authorizes the CFPB to serve a written CID whenever it has "reason to believe" that "any person may be in possession of information relevant to a violation." The CID, which may require the person to produce documents, file written reports, answer questions, furnish materials, or provide testimony, must identify the conduct constituting the alleged violation and applicable law, describe the information requested in sufficient detail to allow it to be fairly identified, and provide a reasonable period of time for the information to be submitted. Within 10 days of receipt, CID recipients are required to meet and confer with the Bureau investigator to discuss and try to resolve any compliance issues.

Documents and information produced in response to a CID must be accompanied by a statement swearing that everything responsive is being produced. Answers to written questions, as well as oral testimony, must be given under oath. The only objections permitted for refusing to provide information are those based on "constitutional or other legal rights or privileges," such as the privilege against self-incrimination. If an entity refuses to provide information, the Bureau can petition the district court for an order compelling the information to be provided. On the other hand, a party who receives a CID only has 20 days to petition the CFPB director, in writing, seeking to modify the demand for information, and the reasons for such request. While such a petition is pending, the recipient is expected to comply with those portions of the request that the party does not seek to modify. The director is under no obligation to grant such petitions.

CIDs are sent out by the CFPB’s enforcement division, and not until the Bureau believes there may have been a violation of consumer law. The CFPB’s enforcement division is more aggressive than its regulatory division, and CIDs issued have been detailed and comprehensive. Indeed, the CFPB’s enforcement orders issued to date typically refer to information obtained through investigations that led to the order.

Unlike discovery requests in litigation, where the requesting party may be required to foot the production bill, there is no provision for reimbursement of costs associated with complying with a CID. Costs include, but are not limited to, those of performing electronic and other searches for information (which may require outside vendors), interviewing employees, attorneys’ fees, and the business costs of lost employee and management time in complying with the CID. Where violations of law have been found, the Bureau has not hesitated to issue administrative orders requiring hundreds of millions of dollars in consumer refunds and penalties.

Given the high cost and potential consequences of responding to a CID, the only effective strategy is to avoid receiving one. Most CFPB investigations have been triggered by a number of consumer complaints against an entity. Entities should focus on establishing adequate systems to assure compliance with consumer financial law, resolve consumer complaints, and closely monitor complaints on the Bureau’s complaint database. Entities better at resolving and/or avoiding consumer complaints are less likely to become targets of a CID.

©2022 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

Subscribe to Publications


The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.