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Kraninger Holding the Line on CFPB Investigative Demands

Aug. 5, 2019, 10:31 AM

Synchrony Financial was likely expecting a sympathetic ear when it petitioned the CFPB to modify or set aside a civil subpoena in October 2018. CFPB Director Kathleen Kraninger didn’t provide one.

Synchrony had asked the Consumer Financial Protection Bureau, at the time led by acting Director Mick Mulvaney, to dial back on documents and information that the bureau’s enforcement staff sought as part of an investigation the branded credit card company’s marketing and servicing of deferred interest promotions.

Rather than providing that relief, Kraninger noted that the civil investigative demand (CID) had already been modified through negotiations with CFPB enforcement attorneys in a May 31 order. The CFPB director also rejected Synchrony’s argument that complying would be a major burden for the Stamford, Conn.-based company.

Kraninger’s ruling on the Synchrony petition was not an aberration. So far, the Trump-appointed CFPB director has ruled on seven petitions to modify or set aside investigative requests, and rejected them all.

Kraninger has ordered a few modifications, largely to bring CIDs in line with an April policy change that required bureau enforcement staff to put more information in statements of purpose at the top of CIDs.

The CFPB referred Bloomberg Law to that policy change when asked for a request for comment.

Rejected Petitions

Requests for documents and depositions have largely been able to survive petitions from companies and individuals unscathed. And that may have caught companies by surprise, said former CFPB deputy enforcement director Lucy Morris.

“It seems to me that she is allowing enforcement investigations to proceed, with the requirement that they be more specific,” Morris, now a partner at Hudson Cook LLP, said.

In Synchrony’s case, Kraninger said the company hadn’t shown the information request “would cause the sort of disruption to Synchrony’s day-to-day business necessary to support a finding of undue burden” and noted its 16,000 employees and $91 billion in assets.

First Step

Receiving a CID is typically the moment a company knows that it is in the CFPB enforcement division’s cross hairs.

CID recipients have 10 days to engage in meetings with bureau enforcement staff, known as meet and confers, to negotiate the scope of a CID. Recipients can also file a petition seeking to have the CID modified or set aside within 20 days of receiving a CID, with the CFPB director making the ultimate decision.

While CIDs themselves are not public, the CFPB can make petitions to change or eliminate them and the decisions on those petitions publicly available.

Subjects of CFPB investigations have not met much success in trying to get demand letters overturned or significantly altered through the administrative process.

Richard Cordray, the CFPB’s first director, ruled on 23 CID petitions to modify or set aside and denied them all. Even Mulvaney, who curtailed much of the CFPB’s enforcement work during his one year at the helm, ruled against the petitioner in his one CID decision.

“Ultimately at the end of the day, the agency is entitled to get what it needs as long as it’s not too burdensome,” Morris said.

Several companies that lost in the administrative process have taken their complaints about CFPB CIDs to federal district courts.

One such company, Seila Law LLC, saw the U.S. Court of Appeals for the Ninth Circuit reject both its request to set aside a CID and its challenge to the CFPB’s constitutionality. Seila Law has asked the U.S. Supreme Court to hear its constitutional challenge.

Supporting the Team

Even amid that litigation backdrop, CFPB directors are inclined to support their enforcement staff.

Much of the information that investigators are seeking is negotiated, making it easier for enforcement attorneys to argue that they need the information they are seeking, said Christopher Peterson, a professor at the University of Utah Law School and a former top aide to Cordray at the CFPB.

“Perhaps these appeals are being rejected because the bureau already made a decision,” he said of Kraninger’s record.

CFPB enforcement activity has picked up since Kraninger took over from Mulvaney in December, and multiple sources have said they’ve seen an increase in CIDs in recent months.

The most recent letters have included the increased information Kraninger has asked for in the statement of purpose, which in some ways results in narrower information requests. But the CFPB’s enforcement staff has remained aggressive in the information they seek.

So companies should not look for Kraninger to reel those information requests in on appeal.

“These decisions help to affirm the message both internally and externally that the director backs the enforcement office even as she’s trying to be open to industry concerns about broad-ranging, unfocused CIDs,” said Quyen Truong, a former top CFPB attorney and now a partner at Stroock & Stroock & Lavan LLP.

To contact the reporter on this story: Evan Weinberger in New York at

To contact the editor responsible for this story: Michael Ferullo at