Consumer Financial Protection Bureau v. Educational Credit Management Corporation (ECMC)
ORDER Adopting Magistrate Judge's Order [Doc. No. 31] and Overruling APPEAL/OBJECTION OF MAGISTRATE JUDGE DECISION [Doc. No. 36]. (Written Opinion). Signed by Judge Susan Richard Nelson on 1/11/2022. (WTW)
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UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Consumer Financial Protection Bureau,
Case No. 21-mc-00019 (SRN/DTS)
Educational Credit Management
Jade Burns and Max Peltz, Consumer Financial Protection Bureau, 301 Howard Street,
San Franscisco, CA 94105, for Petitioner.
Allyson B. Baker, Erin Z. Cass, and Sameer P. Sheikh, Paul Hastings LLP, 2050 M Street
NW, Washington, D.C. 20036; and Aaron M. Scott, Fox Rothschild LLP, 222 South
Ninth Street, Suite 2000, Minneapolis, MN 55402, for Respondent.
SUSAN RICHARD NELSON, United States District Judge
This matter is before the Court on the Objections [Doc. No. 36] of Respondent
Educational Credit Management Corporation (“ECMC”) to the October 28, 2021 Order on
the Petition to Enforce Civil Investigative Demands (the “Order”) [Doc. No. 31]. In the
Order, Magistrate Judge David T. Schultz granted in part and denied in part the Petition.
(Order at 9–10.) Based on a review of the record, and for the reasons below, the Court
overrules ECMC’s objections and adopts the Order.
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ECMC is a nonprofit student loan guaranty agency. (Pet. [Doc. No. 1] at 4; Resp’t
Opp’n [Doc. No. 10] at 4; Order at 1.) As a guaranty agency, ECMC collects defaulted
federal student loans. (Pet. at 4–5; Resp’t Opp’n at 5; Order at 1.) Eight states use ECMC
as their guaranty agency; it also operates as a third-party guarantor processor for other
guaranty agencies. (Pet. at 4; Resp’t Opp’n at 4.)
Petitioner Consumer Financial Protection Bureau (“CFPB”) is investigating when
guaranty agencies, including ECMC, impose collection costs on defaulted student
borrowers. (Pet. at 3; Order at 1–2.) In particular, the CFPB is trying “to determine
whether guaranty agencies, servicers, and debt collectors have employed practices to
forestall” default rehabilitation, leading to collection costs that can exceed 20 percent of
the outstanding loan balance. (Pet. at 3–4.)
During its investigation, the CFPB issued civil investigative demands (“CIDs”) to
ECMC, requesting the production of documents and answers to interrogatories. (Pet. at 5;
Order at 2; see generally Declaration of Maxwell Peltz [Doc. No. 2] (“Peltz Decl.”) Exs.
A, B.) As relevant here, the CIDs sought “email and meeting requests—including sent,
received, cc, or bcc—and any attachments” relating to ECMC’s policies and procedures
for collecting Pre-65 1 Accounts. (Peltz Decl. Exs. A at 7, B at 5.) ECMC had until October
Pre-65 refers to the grace period given to defaulted borrowers to receive the default
notice by mail. (Pet. at 3.)
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9, 2020 to answer the first CID and until October 30, 2020 to respond to the second CID.
(Peltz Decl. Exs. A at 3, B at 1.)
Prior to the deadlines, the parties met and conferred to discuss the CIDs. (Pet. at 5;
Order at 2; see Resp’t Opp’n at 7.) As a result, the CFPB extended the deadlines by two
weeks, resulting in deadlines of October 23 and November 13, 2020. (Pet. at 5–6; Peltz
Decl. ¶¶ 6–7.) On October 16, ECMC produced its first of several productions to the
CFPB. (Resp’t Opp’n at 7; see Order at 2.)
Several months later, on February 12, 2021, the CFPB and ECMC discussed making
a complete production of ECMC’s responsive e-mails.2 (Pet. at 6; Peltz Decl. ¶ 8; see
Order at 2.) Following that call, ECMC produced documents on February 19 and 23, 2021.
(Resp’t Opp’n at 8; see Pet. at 6; Order at 2.) ECMC did not submit the certificate of
compliance, as required by the CIDs. (Order at 2.)
At some time thereafter, the CFPB compared ECMC’s e-mail productions with
ECMC e-mails that it received from third parties. (See Pet. at 7–8.) At that time, the CFPB
identified at least 70 responsive e-mails produced by third parties that ECMC had failed to
ECMC contends that it “did not represent that this would be ECMC’s final
production of documents in response to the CIDs.” (Resp’t Opp’n at 8.)
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The CFPB filed the Petition on March 4, 2021, alleging that ECMC failed to comply
with the CIDs. (Pet. at 7–10.) The Court issued an Order to Show Cause [Doc. No. 5] for
why the Petition should not be granted. ECMC submitted its answer to which the CFPB
responded [Doc. Nos. 10, 18].
The Order granted the portion of the Petition seeking to enforce the CIDs. 3 (Order
at 9.) The Magistrate Judge found that the CIDs were reasonable, issued under lawful
authority, and relevant to a lawful purpose. (Id. at 5.) The Court rejected ECMC’s
arguments that the CFPB was required to meet and confer with ECMC prior to filing the
Petition and that the CFPB violated its own rules by publicly disclosing its investigation.
(Id. at 6–8.) The Court also found that ECMC failed to establish that the enforcement of
the CIDs “would be an abuse the Court’s process,” and therefore granted the Petition to
enforce them. (Id. at 5–9.)
On November 11, 2021, ECMC objected to the Order, requesting that this Court set
it aside. 4 (see generally Resp’t Objs.) The CFPB responded a few weeks later [Doc. No.
The Order denied the CFPB’s motion for costs. (Order at 10.)
ECMC also moved to exclude exhibits attached to CFPB’s reply memorandum, or,
in the alternative, requested leave to file supplemental exhibits [Doc. No. 21]. The
Magistrate Judge denied that motion as moot. (Order at 10.) ECMC does not mention this
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Legal Standard for Reviewing Civil Investigative Demands
Congress established the CFPB to ensure that “consumer debt products are safe and
transparent.” Seila L. LLC v. Consumer Fin. Prot. Bureau, 140 S. Ct. 2183, 2191 (2020).
The CFPB is required to implement and enforce financial consumer protection laws and is
vested “with potent enforcement powers.” Id. at 2193. Those powers include “the
authority to conduct investigations, issue subpoenas and civil investigative demands,
initiate administrative adjudications, and prosecute civil actions in federal court.” Id.
(citing 12 U.S.C. §§ 5562, 5564).
The CFPB may issue CIDs to any person whom the CFPB has reason to believe
may have documents, tangible things, or information relevant to a violation. Id. §
5562(c)(1). Each CID must “state the nature of the conduct constituting the alleged
violation which is under investigation and the provision of law applicable to such
violation.” Id. § 5562(c)(2).
In proceedings, a court will enforce a “[CID] if (1) issued pursuant to lawful
authority, (2) for a lawful purpose, (3) requesting information relevant to the lawful
purpose, and (4) the information sought is not unreasonable.” United States v. Whispering
Oaks Residential Care Facility, LLC, 673 F.3d 813, 817 (8th Cir. 2012) (internal quotation
marks and citation omitted) (applying standard to subpoenas duces tecum issued as part of
ruling in its objections, (see generally Resp’t Objs), and thus the Court does not consider
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a health care fraud investigation). When an agency has satisfied these requirements, “the
burden shifts to the respondent to show that judicial enforcement would amount to an abuse
of the court’s process.” Id. (internal quotation marks and citation omitted). A CID abuses
the court’s process when it is “issued for an improper purpose, such as to harass the
[respondent] or to put pressure on him to settle a collateral dispute, or for any other purpose
reflecting on the good faith of the particular investigation.” Id. at 189. If a recipient does
not comply with the CID, the CFPB may file a petition in federal court to enforce it.
12 U.S.C. § 5562(e)(1). And district courts have jurisdiction over these petitions. Id.
Legal Standard for Reviewing the Magistrate Judge’s Order
When there is no underlying civil action pending and a federal agency files a petition
for an order to show cause why a CID should not be enforced, the court’s ruling will resolve
the entire action and, therefore, it is a dispositive matter.5 See E.E.O.C. v. Schwan’s Home
Serv., 707 F. Supp. 2d 980, 987–89 (D. Minn. 2010), aff’d, 644 F.3d 742 (8th Cir. 2011)
(concluding that “an application to enforce an administrative subpoena duces tecum . . . is
generally a dispositive matter”). The district court reviews de novo those portions of a
dispositive order to which a specific objection is made and may accept, reject, or modify
The Court concludes that this Petition is a dispositive matter and, therefore,
construes the Magistrate Judge’s order as a report and recommendation and reviews de
novo those portions of the order to which ECMC objects. 28 U.S.C. § 636(b)(1); D. Minn.
LR 72.2(b)(3); see Schwan’s Home Serv., 707 F. Supp. 2d at 990 (concluding that an
“application for an order to show cause why a subpoena should not be enforced is a
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the findings of the magistrate judge. See 28 U.S.C. § 636(b)(1); United States v. Miller,
609 F.2d 336, 340 (8th Cir. 1979) (affirming district court’s de novo review of magistrate’s
order enforcing IRS summons); accord D. Minn. L.R. 72.2(b)(3). “Objections which are
not specific but merely repeat arguments presented to and considered by a magistrate judge
are not entitled to de novo review, but rather are reviewed for clear error.” Montgomery v.
Compass Airlines, LLC, 98 F. Supp. 3d 1012, 1017 (D. Minn. 2015). And the district court
will not consider arguments that “were not clearly presented to the magistrate judge.”
Hammann v. 1-800 Ideas.com, Inc., 455 F. Supp. 2d 942, 947–48 (D. Minn. 2006) (citing
Madol v. Dan Nelson Auto. Group, 372 F.3d 997, 1000 (8th Cir. 2004)).
ECMC raises four objections to the Order. First, ECMC asserts that the Magistrate
Judge improperly analyzed whether the CIDs were lawfully issued because he failed to
analyze whether the filing of the Petition was an abuse of the court’s process. (Resp’t Objs.
at 3.) Second, ECMC contends that the Magistrate Judge erred in concluding that the CFPB
did not violate its confidentiality rules under 12 C.F.R. § 1080.14 by publicly filing the
Petition. (Id. at 2.) Third, ECMC argues that the Magistrate Judge improperly conducted
in camera review of the third-party e-mails. 6 (Id.) Lastly, ECMC argues that the Order
fails to provide sufficient clarity and time to respond to the CFPB’s demands. (Id. at 3.)
The Court addresses these objections in turn.
This argument was never before the Magistrate Judge and, therefore, is improperly
raised to this Court. See Hammann, 455 F. Supp. 2d at 947–48 (“A party cannot, in his
objections to an R & R, raise arguments that were not clearly presented to the magistrate
judge.”). Accordingly, the Court will not address this argument.
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Whether the CIDs were lawfully issued
ECMC contends that the Magistrate Judge erred when determining that the CIDs
were lawfully issued, making two arguments. First, ECMC does “not concede” that the
Magistrate Judge reached the right conclusion. Second, and with more specificity, ECMC
asserts that the Magistrate Judge erred by not considering the threshold question of whether
the filing of the Petition was an abuse of the court’s process. The Court applies a different
standard of review to each of the objections.
The Magistrate Judge did not commit clear error in
concluding that the CIDs were lawfully issued
In passing, ECMC asserts that it “does not concede that the CIDs were lawfully
issued.” (Resp’t Objs. 3 n.2.) Because ECMC fails to raise specific objections, the Court
reviews the Order for clear error. See Montgomery, 98 F. Supp. 3d at 1017 (“Objections
which are not specific . . . are reviewed for clear error.”).
The Magistrate Judge concluded that the CFPB had lawful authority to issue the
CIDs under 12 U.S.C. § 5562(c)(1). (Order at 5.) In reaching that conclusion, the
Magistrate Judge found that the CFPB was conducting a lawful investigation into
enforcement of consumer financial protection laws, and that the CIDs sought information
relating to collection costs, which is relevant to that investigation. (Id.) The Magistrate
Judge further found that the information sought was reasonable because it had to do with
ECMC’s business operations as a guaranty agency. (Id.). Lastly, the Magistrate Judge
conducted an in camera review and concluded that the CFPB had reason to believe that
ECMC had not fully complied with the CIDs. (Id.) The Court finds no clear error in this
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analysis. See 12 U.S.C. § 5562(c)(1) (“[T]he Bureau may . . . issue . . . a civil investigative
demand.”); Whispering Oaks, 673 F.3d at 817 (“The respondent bears a heavy burden to
disprove the existence of a valid purpose for an administrative subpoena.”); see also Kerr
v. U. S. Dist. Ct. for N. Dist. of California, 426 U.S. 394, 405–06 (1976) (“[T]his Court has
long held the view that in camera review is a highly appropriate and useful means . . . .”).
The filing of the Petition was not an abuse of the court’s
ECMC also objects to the Order, claiming that it fails to consider whether the filing
of the Petition was an abuse of the court’s process. (Resp’t Objs. at 3, 11–12.) ECMC
contends that it was an abuse of the court’s process because (1) the filing of the Petition
was not “necessary” and (2) the facts undergirding the Petition were unsubstantiated. (Id.)
Because ECMC has raised specific objections, the Court conducts a de novo review.7
The CFPB has discretionary authority to disclose confidential information during
court proceedings. 12 C.F.R. § 1070.45(a)(4) (“The CFPB may disclose confidential
information, in accordance with applicable law, as follows . . . [i]n an administrative or
court proceeding to which the CFPB is a party.”). Notably, the CFPB has authority to file
a petition in federal district court when a party “fails to comply with any civil investigative
demand.” 12 U.S.C. § 5562(e)(1). Nothing prohibits the CFPB from disclosing the
existence of the investigation when it files said petition. Accordingly, if ECMC failed to
ECMC similarly contends that the CFPB violated its confidentiality rules by filing
the Petition. (Resp’t Objs. at 2, 7–10.) That argument is intertwined with the “necessary”
argument, (see id. at 7–12), and, therefore, the Court addresses them together.
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comply with the CIDs, then the CFPB had authority to file the Petition, rendering the
Petition not an abuse of the court’s process.
ECMC attempts to create an additional hurdle for when the CFPB may file a petition
in federal court, asserting that the CFPB must make a “necessity” showing as provided in
Section 1080.14. (Resp’t Objs. at 11; see 12 C.F.R. § 1080.14(b) (“Bureau investigators
may disclose the existence of an investigation to potential witnesses or third parties to the
extent necessary to advance the investigation.”).
The Court is not persuaded that Section 1080.14 applies to disclosures made in a
court proceeding, considering that Section 1080.14 applies to disclosures made to
“potential witnesses or third parties,” while Section 1070.45 explicitly applies to “court
proceedings.” Moreover, Section 1080.14 is permissive—not restrictive. For example, the
regulation affirmatively allows for the CFPB to disclose the existence of an investigation
for the purpose of advancing the investigation. 12 C.F.R. § 1080.14 (“Bureau investigators
may disclose the existence of an investigation.” (emphasis added)). And this permissive
nature is seen throughout the regulation. See 12 C.F.R. §§ 1070.42 (“The CFPB may, in
its discretion, and to the extent consistent with applicable law, disclose confidential
supervisory information or confidential investigative information . . . .” (emphasis
added)); 1070.45(a)(4) (“The CFPB may disclose confidential information, in accordance
with applicable law, as follows . . . [i]n an administrative or court proceeding to which the
CFPB is a party.” (emphasis added)).
But even if ECMC is right that the CFPB was required to make a “necessity”
showing, it did so when it established that ECMC had not fully complied with the CIDs.
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See 12 U.S.C. § 5562(e)(1) (“Whenever any person fails to comply with any civil
investigative demand . . . the Bureau . . . may file . . . a petition for an order of such court
for the enforcement of this section.”); 12 C.F.R. § 1080.10 (“In cases of failure to comply
in whole or in part with Bureau civil investigative demands, appropriate action may be
initiated by the Bureau, including actions for enforcement.”).
Here, the undisputed facts establish that ECMC did not comply with the CIDs as of
the filing of the Petition on March 4, 2021. ECMC concedes that, at the time the Petition
was filed, it had not submitted a certificate of compliance, as required by the CIDs, and it
continued to make productions to the CFPB. (see Resp’t Objs. at 4–5; Order at 2.) In fact,
ECMC affirmatively asserts that it continued to make productions and never indicated “that
any production was its final response.” (Resp’t Objs. at 4.) As such, at least three months
after the deadlines passed, ECMC had not complied with the CIDs. (See Peltz Decl. ¶ 7,
Exs. A, B; Pet. at 5–6.) Because ECMC had not fully complied with the CIDs, it was
legally authorized and necessary for the CFPB to file the Petition. And this is the same
reason why ECMC’s second argument—that the Petition was an abuse of the court’s
process because it relies on unsubstantiated facts—fails as well. Put succinctly, ECMC
agrees with the material facts, as outlined above, which means the CFPB had grounds to
file the Petition. Accordingly, the Petition here was not an abuse of the court’s process
because ECMC had failed to comply with the CIDs.
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For those reasons, the Court overrules ECMC’s objection that the filing of the
Petition was an abuse of the court’s process. 8
Whether the Order is unduly burdensome and unfair
ECMC contends that the Order fails to give it adequate time and sufficient clarity
for how to respond to the CFPB’s demands. (Resp’t Objs. at 12–13.) Not only was this
argument never raised to the Magistrate Judge and is, therefore, improperly argued to this
Court, see Hammann, 455 F. Supp. 2d at 947–48 (explaining that district courts will not
consider arguments that “were not clearly presented to the magistrate judge”), it is the
wrong procedural mechanism. The proper way for ECMC to remedy its concern is to
request leave to file a motion for clarification9 or file a motion for an extension of time.
See, e.g., Cecena v. Allstate Ins. Co., No. C05-03178 JF (HRL), 2006 WL 3533023, at *1
In its objections, ECMC argues that the Magistrate Judge improperly analyzed John
Doe Co. No. 1 v. CFPB, 195 F. Supp. 3d 9 (D.D.C. 2016). (Resp’t Objs. at 9–10.) Because
the Court’s de novo review does not rely on John Doe, the Court does not address ECMC’s
critique of the Magistrate Judge’s analysis. However, the Court notes that John Doe makes
clear that “the subjects of ongoing government investigations often have a legitimate
interest in ensuring that the existence of otherwise confidential government investigations
are not publicly disclosed.” 195 F. Supp. 3d at 13 (emphasis added). Accordingly, it was
ECMC’s interest to keep this investigation confidential and the best way to do that was to
comply with the CIDs by the deadline. If ECMC believed the CIDs were improper or
unclear, then it should have filed “with the Bureau a petition for an order by the Bureau
modifying or setting aside the demand,” 12 U.S.C. § 5562(f)(1), which ECMC did not do
To avoid additional motion practice at this time, the Court finds that no clarification
is needed here because the Order properly required the parties to meet and confer regarding
ECMC’s deficiencies, set a timeline for ECMC to produce documents, and required ECMC
to sign the certificate of compliance. ECMC fails to cite, and the Court did not find, any
precedent finding that such requirements are unreasonable or require clarification.
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(N.D. Cal. Dec. 7, 2006) (considering defendant’s motion seeking clarification of
magistrate’s discovery orders). Notably, ECMC has filed a motion for a time extension
[Doc. No. 41], which has been granted [Doc. No. 43], effectively rendering this argument
Based on the submissions and the entire file and proceedings herein, IT IS
HEREBY ORDERED that ECMC’s objections [Doc. No. 36] are overruled and the Order
Dated: January 11, 2022
s/ Susan Richard Nelson
SUSAN RICHARD NELSON
United States District Judge
The Court notes that ECMC’s argument that it does not know how to “fully comply”
with the CIDs, (Resp’t Objs. at 12), seemingly contradicts ECMC’s contention that it was
“continu[ing] to comply with the CIDs” at all times before and after the CFPB filed the
Petition. (Id. at 1–2 (“Yet, despite ECMC’s significant cooperation and compliance with
the CIDs . . . .”), 4.) It is improper for a subject of an investigation to claim compliance
while at the same time stretching deadlines out by more than one year, effectively avoiding
disclosure and wasting government resources.
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