CONSUMER FINANCIAL PROTECTION BUREAU v. HEARTLAND CAMPUS SOLUTIONS, ECSI

Filing 28

MEMORANDUM OPINION & ORDER. For the reasons stated in the Memorandum & Order attached hereto, the CFPB's Petition (Doc. 1 ) is GRANTED and the Court hereby ORDERS that Respondent fully comply with the June 9 CID. Signed by Judge Cathy Bissoon on 2/28/18. (kg)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
CONSUMER FINANCIAL PROTECTION )
BUREAU,
)
)
Petitioner,
)
)
v.
)
)
HEARTLAND CAMPUS SOLUTIONS, )
ESCI,
)
Respondent.
)

Civil Action No. 17-1502
Judge Cathy Bissoon

MEMORANDUM AND ORDER
I.

MEMORANDUM

Pending before the Court is a Petition to Enforce Civil Investigative Demand filed by
Petitioner Consumer Financial Protection Bureau (“CFPB” or “Bureau”) (Doc. 1). For the
reasons that follow, the CFPB’s Petition will be GRANTED.
A.

BACKGROUND
On November 16, 2017, the CFPB filed a Petition to Enforce Civil Investigative Demand

against Respondent Heartland Campus Solutions, ECSI (“Respondent”). (Doc. 1). In that
Petition, the CFPB stated that it issued a Civil Investigative Demand to Respondent on May 18,
2017 (“May 8 CID”). (Id. ¶ 1). The May 18 CID required Respondent to produce documents
and respond to interrogatories by June 19, 2017. (Id.) On May 24, 2017, pursuant to the CFPB’s
rules, Respondent met and conferred with CFPB investigators, during which time Respondent
objected to the Notification of Purpose in the May 18 CID, stating that it did not comply with 12
U.S.C. § 5562(c)(2). (Id. ¶ 2).

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On June 9, 2018, the CFPB withdrew the May 18 CID and issued a new CID to
Respondent (“June 9 CID”). (Id. ¶ 3). The June 9 CID contained a modified Notification of
Purpose. (Id.). The modified Notification of Purpose states:
The purpose of this investigation is to determine whether a student-loan servicers
or other persons, in connection with servicing of student loans, including
processing payments, charging fees, transferring loans, maintaining accounts, and
credit reporting, have engaged in unfair, deceptive or abusive acts or practices in
violation of §§ 1031 and 1036 of the Consumer Financial Protection Act of 2010,
12 U.S.C. §§ 5531, 5536; or have engaged in conduct that violates the Fair Credit
Reporting Act, 15 U.S.C. §§ 1681, et seq., and its implementing Regulation V, 12
C.F.R. Part 1022. The purpose of this investigation is also to determine whether
Bureau action to obtain legal or equitable relief would be in the public interest.
(Folks Decl., Ex. 3 (Doc. 1-4) at 1)
Following Respondent’s receipt of the June 9 CID, the parties once against met and
conferred on June 19, 2017. (Doc. 1 ¶ 4). Following that meeting, on June 30, 2017, the CFPB
issued Respondent a letter modifying and clarifying certain interrogatories and document
requests. (Id.).
On June 30, 2017, Respondent filed a petition to set aside or modify the June 9 CID. (Id.
¶ 5). The CFPB denied that petition on September 8, 2017, and served the order on Respondent
on September 13, 2017. (Id.). The CFPB’s order directed Respondent to comply with the June 9
CID within 10 calendar days. (Id.). Respondent failed to respond to the June 9 CID within that
period of time. (Id. ¶ 6). Accordingly, the CFPB filed the instant Petition with this Court
pursuant to 12 U.S.C. § 5562(e)(1). In support of its Petition, the CFPB attached the Declaration
of Kelly Folks, an enforcement attorney for the CFPB and counsel of record in this case. (Id. ¶
7; Folks Decl. (Doc. 1-6)).
On November 27, 2017, this Court issued an Order to show cause as to why it should not
compel Respondent to comply with the CFPB’s June 9 CID. (Doc. 9). The Court’s November

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27 Order set forth deadlines for Respondent to Answer the Petition and scheduled a show cause
hearing for February 5, 2018. (Id.). On December 6, 2017, the parties filed a Joint Motion for
Extension of Time, which the Court granted, setting new answer and briefing deadlines and
rescheduling the show cause hearing for February 26, 2018. (Docs. 17 & 18).
On January 12, 2018, Respondent filed its Answer and Opposition to the Petition to
Enforce the June 9 CID (Docs. 19 & 20), and, on January 17, filed errata to those documents to
include the proper signature of counsel (Docs. 23 & 24). In its Opposition, Respondent argues
that the June 9 CID is invalid because its statutorily-mandated Notification of Purpose does not
comply with the notice requirements of 12 U.S.C. § 5562(c)(2), and relevant case law. (Doc. 24
at 1). Respondent relies almost exclusively on the D.C. Circuit’s recent decision Consumer Fin.
Prot. Bureau v. Accrediting Council for Indep. Colls. & Schs., 854 F.3d 683 (D.C. Cir. 2017)
(ACICS). (See generally id.). In that case, the D.C. Circuit declined to enforce a CFPB CID that
was directed to “any entity or person . . . engaged . . . or [] engaging in unlawful acts and
practices in connection with accrediting for-profit colleges” in violation of sections 1031 and
1036 of the Consumer Financial Protection Act of 2010 or any other federal consumer financial
protection law, concluding that, “as written, the Notification of Purpose fails to state adequately
the unlawful conduct under investigation or the applicable law.” 854 F.3d at 686, 690.
Respondent argues that the Notification of Purpose in this case is “substantially similar” to the
one found to be inadequate in ACICS, and “fails to provide [Respondent] ‘with fair notice as to
the nature of the Bureau’s investigation.’” (Doc. 24 at 1-2). Specifically, Respondent argues
that the June 9 CID’s list of five activities under investigation—i.e., processing payments,
charging fees, transferring loans, maintaining accounts, and credit reporting—fails to provide
sufficient notice to Respondent because it “merely categorize[s] all aspects of a student loan

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servicing operation.” (Doc. 24 at 6). Respondent asserts that, because the CFPB has not
provided Respondent with fair notice of its investigation, it cannot meet its burden under United
States v. Morton Salt Co., 338 U.S. 632, 652 (1950) and Univ. of Med & Dentistry of N.J. v
Corrigan, 347 F.3d 57, 64 (3d Cir. 2003). (Doc. 24 at 13-15). Accordingly, Respondent asks
that the Court deny CFBP’s Petition to enforce the June 9 CID. (Doc. 24 at 15).
On February 2, 2018, the CFPB filed a Reply to Respondent’s Answer and Opposition.
(Doc. 26). In its Reply, the CFPB argues that the Notification of Purpose in the June 9 CID
meets the statutory requirements and “adequately informed Respondent of the purpose and focus
of the Bureau’s investigation.” (Doc. 26 at 9). The CFPB also argues that the ACICS decision is
distinguishable from this case, for two reasons. First, the CFPB asserts that the CID in ACICS
did not describe the conduct under investigation, whereas the CID in this case states that the
investigation concerns student loan servicing conduct, “including processing payments, charging
fees, transferring loans, maintaining accounts, and credit reporting.” (Id. at 7). Second, the
CFPB explains that the ACICS decision involved a CID sent to a non-profit educational
accrediting organization, and that the ACICS Court noted that the CFPB has no statutory
authority to investigate accreditation. (Id.). In contrast, the CFPB argues, this case involves
student loan servicing, which clearly falls within the CFPB’s statutory authority. (Id.). The
CFPB also notes that, following the ACICS decision, two district courts have upheld CIDs with
similar language to the one at issue in this case. (Id. at 7-9 (citing Consumer Fin. Prot. Bureau v.
Source for Pub. Data, LP, No. 3:17-MC-16-G-BN, 2017 WL 2443135 (N.D. Tex. June 6, 2017)
and Consumer Fin. Prot. Bureau v. Seila Law, LLC, No. 8:17-CV-01081, 2017 WL 6536586
(C.D. Cal. Aug. 25, 2017)).

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The Court held a Show Cause hearing on February 26, 2018. (Doc. 27). At that hearing,
counsel for Respondent acknowledged that the CFPB has authority to investigate potential
violations of federal consumer financial protection laws by student loan servicers. Nevertheless,
counsel reiterated Respondent’s position that the Notification of Purpose in the June 9 CID is
infirm because, in Respondent’s view, it fails to provide fair notice of what the CFPB is
investigating. Counsel again argued that the clause in the CID stating that the CFPB is
investigating potential violations connected to “processing payments, charging fees, transferring
loans, maintaining accounts, and credit reporting” fails to provide fair notice because, taken
together, the conduct listed defines the entirety of Respondent’s business operations. Counsel
conceded, however, that had the CFPB notified Respondent that it was investigating just one of
the five activities listed— the “charging of fees,” for example—the CID would have provided
sufficient notice to satisfy the statutory requirement. Following the Show Cause hearing, the
Court took the matter under advisement.
B. ANALYSIS
In the ACICS decision, the United States Court of Appeals for the D.C. Circuit
summarized the statutory background of a petition by the CFPB to enforce a CID as follows:
Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection
Act (“Dodd-Frank Act”) in the wake of the financial crisis of 2008 and 2009.
State Nat'l Bank of Big Spring v. Lew, 795 F.3d 48, 51 (D.C. Cir. 2015) (citing
Pub. L. No. 111-203, 124 Stat. 1376 (2010)). Title X of the Dodd-Frank Act—the
Consumer Financial Protection Act (“CFPA”)—established the Consumer
Financial Protection Bureau to “regulate the offering and provision of consumer
financial products or services under the Federal consumer financial laws,” 12
U.S.C. § 5491(a), and “to implement and ... enforce Federal consumer financial
law,” id. § 5511(a); see also id. §§ 5492(a), 5511(b)-(c). The “Federal consumer
financial law” that the CFPB enforces includes the CFPA and eighteen preexisting consumer protection statutes. Id. § 5481(12), (14); Morgan Drexen, Inc.
v. CFPB, 785 F.3d 684, 686–87 (D.C. Cir. 2015). Relevant to our analysis, the
CFPA prohibits “unfair, deceptive, or abusive act [s] or practice[s] under Federal
law in connection with any transaction with a consumer for a consumer financial
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product or service, or the offering of a consumer financial product or service.” 12
U.S.C. § 5531(a); see also id. § 5536(a)(1)(B). “Consumer financial product[s] or
service[s]” include consumer loans and debt collection activities. See id.
§ 5481(5), (15).
The CFPA vests the Bureau with broad “rulemaking, supervisory, investigatory,
adjudicatory, and enforcement authority . . . ” Morgan Drexen, 785 F.3d at 687
(citing 12 U.S.C. §§ 5512(b), 5514-5516, 5562-5564). One of the CFPB’s
“primary functions” is to “supervis[e] covered persons for compliance with
Federal consumer financial law, and tak[e] appropriate enforcement action to
address violations of Federal consumer financial law[.]” 12 U.S.C. § 5511(c)(4).
Pursuant to its investigative authority, the Bureau may issue CIDs requiring the
production of documents and oral testimony from “any person” that it believes
may be in possession of “any documentary material or tangible things, or may
have any information, relevant to a violation” of the laws that the Bureau
enforces. Id. § 5562(c)(1); see also 12 C.F.R. § 1080.6. CIDs allow the Bureau
to investigate and collect information “before the institution of any proceedings.”
12 U.S.C. § 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); see also 12 C.F.R. § 1080.5.
Because “CIDs are not self-enforcing,” John Doe Co. v. CFPB, 849 F.3d 1129,
1131 (D.C. Cir. 2017), the CFPB must file a petition in federal court to enforce a
CID if a recipient refuses to comply, 12 U.S.C. § 5562(e)(1).
ACICS, 854 F.3d 683, 687-88 (D.C. Cir. 2017).
As discussed above, Respondent’s primary argument is that the Notification of Purpose
in the June 9 CID fails to satisfy 12 U.S.C. § 5562(c)(2) and its implementing regulation. Again,
Section 5562(c)(2) mandates that each CID “state the nature of the conduct constituting the
alleged violation which is under investigation and the provision of law applicable to such
violation.” 12 U.S.C. § 5562(c)(2). The CFPB’s implementing regulation likewise provides that
a subpoenaed person “shall be advised of the nature of the conduct constituting the alleged
violation that is under investigation and the provisions of law applicable to such violation.” 12
C.F.R. § 1080.5. “Because the validity of a CID is measured by the purposes stated in the
notification of purpose, the adequacy of the notification of purpose is an important statutory
requirement.” ACICS, 854 F.3d at 690 (citation omitted). “Yet, like every other administrative

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agency, the CFPB can define the contours of its investigation ‘quite generally’ while still
complying with its statutory obligations.” Seila Law, 2017 WL 6536586, at *3 (citing FTC v.
Invention Submission Corp., 965 F.2d 1086, 1088, 1090 (D.C. Cir. 1992), FTC v. Carter, 636
F.2d 781, 784, 787–89 (D.C. Cir. 1980), and FTC v. Texaco, Inc., 555 F.2d 862, 868, 874 & n.
26 (D.C. Cir. 1977)).
Applying the above legal standards, the Court finds that the June 9 CID satisfies Section
5562(c)(2)’s statutory notice requirement. Specifically, the June 9 CID notifies Respondent both
of the “nature of the conduct” under investigation—potential violations of law connected to
student loan servicing, including “processing payments, charging fees, transferring loans,
maintaining accounts, and credit reporting”—and the applicable provisions of law—the
Consumer Financial Protection Act and the Fair Credit Reporting Act. See 12 U.S.C. §
5562(c)(2). Respondent’s argument that the CID’s list of activities under investigation—i.e.,
processing payments, charging fees, transferring loans, maintaining accounts, and credit
reporting—fails to provide Respondent with fair notice because it encompasses all aspects of a
student loan servicer’s operations is a “red herring.” See Doc. 24 at 6. Respondent cites to no
authority—and the Court finds none—holding that the CFPB is barred from investigating the
totality of a company’s business operations, rather than a mere subset of its operations, when it
has a legitimate reason to believe that violations have occurred. To the contrary, Respondent
acknowledged at the Show Cause hearing that the CFPB has broad authority to investigate
potential violations of federal consumer financial protection laws. Furthermore, Respondent
conceded that, had the CFPB issued a CID notifying Respondent that it was investigating one of
the five activities listed in the June 9 CID (specifically, the “charging of fees”), it would have
met the statutory requirements. The Court sees no reason why, if the CFPB has the authority to

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investigate each of the discrete activities listed in the June 9 CID and a legitimate basis to believe
that violations related to those activities occurred, it would be required to issue five separate
CIDs, rather than a single CID, as it did in this case. 1
Likewise, the Court disagrees with Respondent that the Notification of Purpose in this
case is “substantially similar” to the one in ACICS. As noted, in ACICS, the Bureau issued a
CID that was directed to “any entity or person . . . engaged . . . or [] engaging in unlawful acts
and practices in connection with accrediting for-profit colleges, in violation of sections 1031 and
1036 of the Consumer Financial Protection Act [] or any other Federal consumer financial
protection law.” ACICS, 854 F.3d at 686. The June 9 CID clearly is distinguishable. First,
unlike the CID in ACICS, the June 9 CID specifies the individuals and entities under
investigation (“student loan servicers”), the types of activities under investigation (“processing
payments, charging fees, transferring loans, maintaining accounts, and credit reporting”), and
two relevant statutes (the Consumer Financial Protection Act and the Fair Credit Reporting Act).
The June 9 CID does not include a “catch-all” provision relating to potential violations of “any
other Federal consumer financial law.” 2 Furthermore, whereas, in ACICS, the D.C. Circuit
noted the Bureau’s “recognition that it lacks statutory authority over the accreditation process of
for-profit colleges,” 854 F.3d at 691, here, as Respondent acknowledged at the Show Cause
hearing, the CFPB has broad statutory authority to investigate student lending practices. For

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The Court acknowledges that Respondent has indicated that it believes that the phrase
“maintaining accounts” may be vague. Given the context here, the Court disagrees. Moreover,
it is difficult to understand how Respondent can, in one breath, take the position that
“maintaining accounts” is a component of what Petitioner does, and in the other, indicate that it
does not understand to what this phrase refers.
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The Court notes that, in its Opposition to the CFPB’s Petition, Respondent mischaracterizes the
Notification of Purpose contained in the June 9 CID to state that it does include such a “catchall” provision. See Doc. 24 at 6.
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these reasons, the Court finds that the Notification of Purpose in the June 9 CID meets Section
5562(c)(2)’s statutory requirements.
The Court also finds that, contrary to Respondent’s arguments, the CFPB has met its
burden under United States v. Morton Salt Co., 338 U.S. 632 (1950) and Univ. of Med &
Dentistry of N.J. v Corrigan, 347 F.3d 57 (3d Cir. 2003). In Corrigan, the Court of Appeals for
the Third Circuit held, that to enforce an administrative subpoena such as a CID, an agency must
show that (1) its “investigation will be conducted pursuant to a legitimate purpose”; (2) “the
inquiry is relevant”; (3) “the information demanded is not already within the agency’s
possession, and that the administrative steps required by the statute have been followed”; and (4)
“[t]he demand for information must not be unreasonably broad or burdensome.” Corrigan, 347
F.3d at 64. The June 9 CID meets all four Corrigan requirements.
First, the June 9 CID’s legitimate purpose is clear on its face—that is, to investigate
whether student loan servicers or others committed unfair, deceptive, or abusive acts or practices,
in violation of the Consumer Financial Protection Act, or violated the Fair Credit Reporting Act
and its implementing regulation, by their actions in connection with the servicing of student
loans. Once again, Section 5562(c)(1) authorizes the Bureau to issue CIDs to “any person” who
“may be in possession, custody, or control of any documentary material or tangible things, or
may have any information, relevant to a violation” of federal consumer financial law. 12 U.S.C.
§ 5562(c)(1). Because the CFPB has the authority to investigate potential violations of both the
Consumer Financial Protection Act and the Fair Credit Reporting Act, its purpose in issuing the
June 9 CID is presumptively legitimate.
Second, the information requested in the June 9 CID appears to be relevant to the CFPB’s
investigation. As the CFPB argues, at a pre-complaint stage, “an investigating agency is under

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no obligation to propound a narrowly focused theory of a possible future case.” FTC v. Texaco,
Inc., 555 F.2d 862, 874 (D.C. Cir. 1977) (en banc). “Accordingly, the relevance of the agency’s
subpoena requests may be measured only against the general purposes of its investigation.” Id.
Here, all requests appear to be related to Respondent’s student loan servicing, and thus are
relevant to the CFPB’s stated investigatory purpose.
Third, there is no basis for the Court to find that the information demanded is already
within the agency’s possession or that the CFPB failed to abide by each administrative step that
the regulations require (see Doc. 1-6 ¶¶ 4-13), as Respondent makes no argument to that effect.
Finally, the Court notes that Respondent does not argue that the information requested in
the June 9 CID is unreasonably broad or burdensome, only that the Notification of Purpose is
inadequate. However, as discussed above, the Court finds that the Notification of Purpose set
out in the June 9 CID is sufficient to provide Respondent with fair notice of the CFPB’s
investigation.
II.

ORDER

For the reasons stated above, the CFPB’s Petition (Doc. 1) is GRANTED and the Court
hereby ORDERS that Respondent fully comply with the June 9 CID.

IT IS SO ORDERED.

February 28, 2018

s/Cathy Bissoon
.
Cathy Bissoon
United States District Judge

CC (via ECF email notification):
All Counsel of Record

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