Consumer Financial Protection Bureau Director Richard Cordray this month signed an order rejecting J.G. Wentworth, LLC’s petition for an order to set aside or modify a CFPB civil investigative demand.
In the order, Cordray said that the CFPB in September, 2015, has issued a civil investigative demand (CID) to J.G. Wentworth, stating in the DIC that it had been issued “to determine whether persons involved in advancing funds in exchange for the rights to future payments from structured settlements or annuities have engaged or are engaging in acts or practices that violate sections 1031 and 1036 of the Consumer Financial Protection Act of 2010 [CFPA or Act], 12 U.S.C. §§ 5531, 5536; the Truth in Lending Act [TILA], 15 U.S.C. §§ 1601 et seq., or its implementing regulations; or any other Federal-consumer financial law, and whether Bureau action to obtain legal or equitable relief would be in the public interest.”
Further, Cordray said that the CID “posed fourteen document requests, seven interrogatories, and two requests for written reports seeking infom1ation about structured-settlement transactions and other products and services provided by J.G. Wentworth.”
In its petition to set aside the CID, J.G. Wentworth alleged that the CFPB lacked jurisdiction because J.G. Wentworth was not on of the covered persons within the scope of the CFPA, because J.G. Wentworth’s purchase of structured settlement payments rights was not within the scope of TILA, and because the CFPB had sufficient information – based on J.G. Wentworth’s responses to previous information-gathering requests – to determine that it was without jurisdiction.
Director Cordray said that the arguments were unpersuasive. For one, he said that the scope of the investigation is broad enough to cover not only covered persons within the CFPA but others, and further that J.G. Wentworth may be a covered person – and that that question might be answered by the investigation. For another, the CFPB director said that J.G. Wentworth was incorrect in “claiming that nothing in the definition of ‘financial product or service’ under § 5481(15)(A) [of the CFPA] might be relevant to the Bureau’s investigation.” Said Director Cordray:
By way of example, one such financial product or service may have been provided as part of the company’s efforts to obtain favorable tax treatment. As the Petition notes, J.G. Wentworth is exempt from federal tax on the purchase of structured settlement payments if a state court determines that the transaction ‘is in the best interest o f the payee, taking into account the welfare and support o f the payee’s dependents.’ Pet. at 4 (citing26U.S.C. § 5891(b)(2)); see also 26 C.F.R. § 157.5891-1. In accordance with this provision, the company may be providing consumers with financial advisory services to assist in determining whether a structured settlement transaction is in their best interest. As J.G. Wentworth acknowledges, the definition of ‘financial product or service’ under the CFPA includes ‘providing financial advisory services . . . to consumers on individual financial matters.’ See Pet. at 9; 12 U.S.C. § 5481(15)(A)(viii). The Bureau therefore has authority to determine, without limitation, whether J.G. Wentworth or any other person or entity has provided such services to consumers in conformity with Federal consumer financial law.
In addition, it made no sense that CFPB should have been aware that it did not have jurisdiction, according to Director Cordray, since he had concluded that the CFPB did have jurisdiction based on the first two rationales.
The CFPB Director concluded as follows:
For the foregoing reasons, J.G. Wentworth’s petition to modify or set aside the CID is denied. Within 21 calendar days of this Decision and Order, J.G. Wentworth is directed to produce all responsive documents, items, and information within its possession, custody, or control that are covered by the CID. The company is welcome to engage in further discussions with the Bureau’s enforcement team about any further suggestions for modifying the CID, which may be adopted by the Assistant Director for Enforcement or his Deputy as appropriate.
The opinion (In Re J.G. Wentworth, LLC, 2015-MISC-J.G. Wentworth LLC-0001 (CFPB Feb. 11, 2016), is available here.