The CFPB received a lesson in the importance of specificity on April 21st when the United States District Court for the District of Columbia's Judge Richard J. Leon found that it overreached in its attempt to enforce a Civil Investigative Demand ("CID") it served on the Accrediting Council for Independent Colleges and Schools ("ACICS").
The Opinion warned the CFPB to be "especially prudent before choosing to plow head long into fields not clearly ceded to them by Congress". Yet the takeaway for the CFPB is likely one related to the editing of its CID language rather than a true limitation of its scope of authority. The CID requested a list of all schools ACICS has accredited since 2010, a list of all individuals involved in the accreditation of 21 specific schools, and for ACICS representatives to attest to the "overall approach" to accreditation of seven specific schools. The purpose set forth in the Statement of Purpose was to determine whether unlawful acts were occurring "in connection with accrediting for-profit colleges" in violation of the Consumer Financial Protection Act of 2010, "or any other Federal consumer financial protection law". ACICS took the position that the CFPB had no authority to regulate an accreditation process that has no connection to a school's private lending practices. ACICS pointed out that none of the laws listed in the Statement of Purpose are "even tangentially" associated with the accrediting process of for-profit schools. The CFPB argued that it "has authority to investigate for-profit schools in relation to their lending and financial-advisory services" and no duty to accept at face value ACICS's assertions about the scope of its involvement with student lending. The Court held that the CFPB was never empowered to investigate the accreditation process generally. The Court stated that the CFPB may be entitled to learn the extent of ACICS connection to potential violations of the consumer financial laws by the schools it accredits, but that the phrases used in its Statement of Purpose and requests, such as "overall approach", "all schools, and "all individuals" was a clear indication that the focus was not merely on the financial services of the schools, but on the accreditation process generally. The Court's definition of the CFPB's boundaries is important to the Agency as it continues to test the limits of its power. Requiring specificity of intent and a nexus to its charter prior to demanding information from a private company is fundamental to protecting the public from the overreach of any government agency. But while the CFPB may be leaving without the information it wanted from ACICS this time, the door was left open for it to limit the scope of its initial request to focus on determining whether there is a nexus between student lending and ACICS. This Opinion may signal a brief reprieve for ACICS as the CFPB regroups, but the lesson here is largely one of strategy.