Incognito Company Loses Bid to Stop Consumer Probe

WASHINGTON (CN) – A federal judge ruled that an appeals court’s decision to rehear a case on the constitutionality of the Consumer Financial Protection Bureau’s structure doomed an anonymous company’s attempt to prevent the agency from continuing an investigation.

The company, which U.S. District Judge Rudolph Contreras has allowed to remain anonymous until it can appeal his decision to a higher court, had sought an injunction to prevent the CFPB from moving forward with an investigation during a short period of time between the D.C. Circuit’s decision that the agency’s structure was unconstitutional and last week, when it agreed to rehear the case en banc.

In October, the D.C. Circuit declared it unconstitutional that the CFPB’s director can only lose his job for cause, deciding that without the president of the United States being able to remove the CFPB’s director at will, the director wields “massive,” unchecked power.

The anonymous company in Friday’s ruling used the D.C. Circuit opinion to petition the CFPB to stop a civil investigative demand against the company, saying it had been issued while unconstitutionally structured. If the CFPB didn’t stop the investigation, the company at least asked it be allowed to remain anonymous, according to Contreras’ 20-page opinion.

When the CFPB issues a civil investigative demand against a company, it states the alleged violation and sometimes requires the company to turn over documents that will help in the investigation.

The CFPB denied the company’s request and said it would post the investigative demand online, forcing the company to head across town to the Washington, D.C., District Court to request a preliminary injunction.

In its complaint, the company, which buys and sells the rights to pensions and other similar periodic income sources, claimed its business would be “irreversibly damaged” if the CFPB posted the demand online.

But while the company’s case was pending before Contreras, the D.C. Circuit decided to rehear the CFPB’s case en banc, vacating its original decision that found the agency unconstitutionally organized.

This decision sank the company’s chances of winning injunctive relief from Contreras before its case even took off, the judge said.

“Although at some later point in this case the court may very well be convinced that, as the PHH Corporation panel held, the CFPB was unconstitutionally structured during the course of its investigation, John Doe’s briefing of the preliminary injunction motion was directly undermined by the vacatur of the PHH Corporation opinion,” Contreras wrote, referring to the D.C. Circuit decision that found the CFPB’s structure unconstitutional.

But even if the D.C. Circuit had not agreed to rehear the case en banc, the company’s request still would have likely fallen. After all, the October decision did “not gut the CFPB or Dodd-Frank altogether,” but simply cut out the provision that only allows the agency’s director to be removed for cause, Contreras wrote.

Contreras also found no convincing argument from the company that it would suffer “irreparable harm” without an injunction, saying it put forward no evidence that President Donald Trump would remove the CFPB director if he could.

“Absent any further evidence that plaintiff is being concretely harmed by the current state of affairs caused by the vacatur of the PHH Corporation panel decision, the court will follow the D.C. Circuit’s lead and allow the legal wrangling to play out,” Contreras wrote.

Cathy Hinger, an attorney with the Washington, D.C. firm Womble Carlyle who represents the anonymous company, did not respond to a request for comment sent Tuesday afternoon.

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