WASHINGTON (Legal Newsline) - A federal appeals court has ruled that the Consumer Financial Protection Bureau overstepped its bounds when issuing a Civil Investigation Demand to the Accrediting Council for Independent Colleges and Schools (ACICS).
The ruling brings into question the authority of the CFPB moving forward, and what actions it is actually allowed to take in the name of protecting consumers.
“The court held that the Bureau lacked the authority to investigate ACICS, and thus the CID should be set aside,” said Anthony DiResta, a former director of the FTC and now a partner at Holland & Knight.
The case dates back to 2015, when CFPB initially issued the CID. The CPFB, which was granted authority to regulate the financial services industry by the Dodd-Frank consumer protection bill, stated its purpose was to determine is any unlawful acts were being committed in connection with accrediting for-profit colleges.
The CID would have required the ACICS to send a representative to an oral testimony. The representative would have been questioned on the organization’s policies, procedures and practices relating to the accreditation of seven particular schools.
The ACICS also would have been expected to identify all post-secondary educational institutions that ACICS has accredited since January 2010, as well as all individuals affiliated with the organization who conducted any accreditation reviews since said date specific to 21 particular schools.
The ACICS did not comply with this request and submitted a petition to the CFPB to disregard the CID. It argued it was not within the bounds of the CFPB to oversee the accrediting process, and the request seemed random, as it was not connected with the initial investigation.
“According to the CFPB, this CID was issued following a CFPB investigation of for-profit colleges for deceptive practices tied to their private student-lending activities," DiResta said. “The CFPB was clearly going after the accreditation process, something over which it does not have jurisdiction.”
In court, the CFPB argued that it had the authority to investigate the money-lending adversaries of for-profit schools, so it should also be allowed to investigate any unlawful accreditation violations.
The U.S. Court of Appeals for the District of Columbia Circuit denied CFPB’s CID request, stating that investigating private student-lending activities does not give it the right to open up a case on an entirely different case that is out of its jurisdiction.
“The court agreed with ACICS that the accreditation process has no connection to a school's private student lending practices,” DiResta said. “The statement of purpose in the CID said nothing about an investigation into the lending or financial-advisory practices of for-profit schools.”