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Court Rules Against Pension Factoring Company That Challenged Consumer Financial Protection Bureau’s Authority, Investigation

A federal court has upheld the constitutionality of the Consumer Financial Protection Board’s structure, and further found that the CFPB’s investigation into a pension factoring company’s business practices was neither overboard nor outside the CFPB’s jurisdiction.

In Consumer Fin. Prot. Bureau v. Future Income Payments, LLC, Case No. SACV 17-00303-JLS ((SSx), 2017 U.S. Dist. LEXIS 80074 (C.D. Cal. May 17, 2017), Judge Josephine L. Staton of the federal district court for the Central District of California granted the CFPB’s petition to enforce its civil investigative demand (CID) against Future Income Payments, LLC (FIP), and denied FIP’s motion to stay the case.

The case is one of several that involve a challenge to constitutionality of the CFPB’s structured – cases that include other secondary insurance market companies that have challenged CIDs by the CFPB.

Judge Staton drew parallels between the CFPB’s structure and that of other federal agencies – such as the Federal Trade Commission, the Social Security Administration, and the Federal Housing Financial Agency – whose statutory authority and structure have been found to be constitutional in the face of challenges based on alleged violations of federal separation of powers of the legislative and executive branches.

The CFPB’s investigation in this case sought information about FIP’s business practices related to the company’s “income-stream-advance transactions” and, in particular, whether FIP engaged “in unlawful acts and practices in connection with offering or providing extensions of credit or financial advisory services related to transactions involving pensions, annuities, settlements, or other future-income streams in violation of §§ 1031 and 1036 of the Consumer Financial Protection Act of 2010, 12 U.S.C. §§ 5531, 5536, or any other Federal consumer-financial law.”

The CID’s nine interrogatories, two requests for written reports, and ten requests for documents sought “information regarding Future Income Payments’ structure, investors, marketing, business relationships, bank accounts, collection efforts, financial records, involvement in other government investigations, and income-stream-advance transactions.”

These requests were not overbroad, and were within the authority of the CFPB under the Consumer Financial Protection Act, according to Judge Staton.

Judge Staton also rejected FIP’s request for a stay of proceeding pending en banc proceedings in PHH Corp. v. CFPB, following the vacated 2-1 decision, PHH Corp. v. CFPB, 839 F.3d 1 (D.C. Cir. 2016), reh’g en banc granted, order vacated (Feb. 16, 2017).

The full opinion is available here.

Earlier Secondary Insurance Market Blog posts about the CFPB-FIP litigation (some of which pre-dated the un-masking of FIP as the “John Doe Company” that was challenging the CFPB’s authority) are here, here, and here.

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