Citing Primarily Procedural Reasons, BCFP Denies Firstsource's Petition to Modify or Set Aside Second CID

On July 23, 2018, the Bureau of Consumer Financial Protection (BCFP or Bureau) denied a petition to modify or set aside its second Civil Investigative Demand (CID) against Firstsource Advantage, LLC (Firstsource). Together, the petition and order comprise of 61 pages. Below are highlights of each.

The CIDs and the Petition

According to the redacted petition filed by Firstsource, the BCFP issued its first CID in April of 2017. Prior to receiving the first petition, Firstsource received ample communication from the BCFP in regards to what prompted the CID. The company states in its petition that, despite its belief there was no violation of the Fair Debt Collection Practices Act (FDCPA), it chose to be transparent with the BCFP and responded fully to the CID.

On September 28, 2017, the Bureau issued a second CID against Firstsource. Firstsource filed a petition to set aside or amend this second CID for several reasons, including:

1. There was no FDCPA violation and the documents received by the BCFP from the first CID supports this statement.
2. The second CID should be set aside because the BCFP had no justification for issuing it. Firstsource claims the Bureau failed to identify a reason to believe that the company violated the FDCPA in any capacity.
3. Firstsource called out the communication received from the BCFP regarding the first CID and that the CFPB provided no such communication prior to the second CID.

In the event the Bureau decided not to set aside the second CID, Firstsource argued that it should be modified. The company claimed that responding to the CID as currently written would be unduly burdensome as it would require manually reviewing hundreds of thousands of audio files. The petition also argued that the second CID targets certain accounts that are time barred by the FDCPA’s statute of limitations.

Firstsource also requested confidential treatment of its petition and the BCFP’s response thereto.

BCFP’s Order Denying Petition

The BCFP’s order, signed by Acting Director Mick Mulvaney, denied Firstsource’s petition in its entirety, except that it agreed to redact certain portions of the petition.

The Bureau refused to set aside the CID, stating that the standard for issuing a CID does not require a narrative or meaningful dialogue about the investigation. Instead, the BCFP found that it only needs to state the nature of the conduct constituting the violation, which it claims it did.

The BCFP also declined to modify the petition, largely relying on vague and procedural reasoning. The BCFP ruled that Firstsource’s statement that responding to the CID would require manual review of hundreds of thousands of audio files was not sufficiently specific to qualify as unduly burdensome. The Bureau also declined to modify the CID so that only a sample of call recordings would need to be produced because the request to do so was not timely submitted.

As for Firstsource’s argument that the CID requests information about accounts that are time-barred by the FDCPA’s statute of limitations, the Bureau responded that the order states the FDCPA was not the only statute being investigated -- the BCFP was also looking into any potential violations of the Consumer Financial Protection Act (CFPA). The statute of limitations under the CFPA is three years from the time of discovery, not from the time the violation occurred. Since the Bureau has not yet discovered a violation, the statute of limitations has not yet been triggered, thus making it okay to request the information. The BCFP topped off this argument by stating that, “here, the Bureau seeks the recordings in question to determine (and discover) whether there has been a violation” -- thus effectively triggering the statute of limitations if a violation is found.

insideARM Perspective

CIDs are generally confidential matters, but they may become public if a company chooses to challenge the demand for information, which is what occurred here. Due to this, companies likely weigh carefully their decisions to challenge CIDs in order to prevent needlessly publicizing that they are in the BCFP’s crosshairs.

Responding to CIDs is a burdensome process; to have to do it twice in a row is even more so. As this is the second CID issued against Firstsource in a short amount of time, it is interesting that the BCFP would deny some requests on procedural and somewhat vague grounds. Denying the request to provide samples of recordings due to the timing of the request falls flat on an informed reader. It is also hard to imagine how listening to hundreds of thousands of audio files does not qualify as an unduly burdensome request when such a task would require significant manpower to complete.

With that said, the most interesting portion of the order is the discussion on the statute of limitations. If the statute of limitations does not begin to run until a violation is discovered and the BCFP has the ability to issue CIDs with no time limit in order to discover such violations, which would then trigger the statute of limitations once discovered, then it seems that liability is open ended...forever?