Everything is our business: CFPB has broad pre-lawsuit discovery powers

Posted on 07/29/2014 at 09:08 AM by John Lande

By now all entities involved in financial services are aware of the CFPB's focus on consumer financial protection, and the extensive rulemaking authority of the CFPB. What may be surprising, however, is how much authority the CFPB has to compel individual financial institutions to produce information outside the standard regulatory scope, and before a lawsuit or administrative proceeding is ever initiated. Typically, authority to compel discovery of information is limited before formal litigation begins. This rule is tempered for regulated financial institutions where documents are already available to regulators. What is surprising about the CFPB's authority is that it includes the power to compel individuals to provide sworn testimony prior to the commencement of formal litigation. Failure to comply with the CFPB's subpoena can lead to a finding of contempt, which can be punished with fines or imprisonment. In order to exercise this broad authority, the CFPB only needs to demonstrate that there is 'reason to believe that any person may be in possession, custody, or control of any documentary material or tangible things, or may have any information, relevant to a violation . . . .' 12 U.S.C. § 5562(c) (2014). As many financial institutions already know, a 'violation' can be a practice that is 'unfair, deceptive or abusive.' Thus, it doesn't take much for the CFPB to justify using its broad authority to compel testimony, or require the production of documents. Any material produced pursuant to a CFPB subpoena is confidential. This makes it difficult to identify how prolific these pre-litigation subpoenas are. What is clear is that any recipient of a CFPB subpoena should consult with counsel to ensure that the CFPB has complied with its procedure and is not exceeding its authority.    

Categories: John Lande, Banking Law, Posts


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