CFPB’s Denial of Civil Investigative Demand Appeal Demonstrates Expansive Product Reach
March 21, 2016

Last month, the Consumer Financial Protection Bureau’s (“CFPB”) Director denied J.G. Wentworth’s (“JGW”) petition to set aside or modify a CFPB civil investigative demand (“CID”) that required JGW to produce 14 documents, seven interrogatories and two requests for written reports seeking information about structured-settlement transactions and other financial products/services provided by JGW. JGW, in petitioning to set aside the CID, asserted that (1) JG is not a “covered person” under the CFPB’s enabling legislation because JGW did not provide any “consumer financial product or service” thereunder, (2) the CFPB lacked jurisdiction to issue the CID because the purchase of a structured settlement and its annuity-backed payments does not constitute an extension of credit subject to the Truth in Lending Act, and (3) the CFPB had previously conducted sufficient discovery to determine that it lacked jurisdiction to issue the CID. In denying all three of JGW’s arguments, the CFPB Director asserted broad authority to issue the CID, noting that the CFPB “[i]s authorized to proceed with an investigation so long as ‘there is some plausible ground for jurisdiction, or to phrase it another way, unless jurisdiction is plainly lacking,’” and that this jurisdiction cannot be defeated by asserting the substantive defense that the subject person of a CID is not engaged in offering CFPB regulated consumer financial products or services.

The CFPB’s denial of this petition to set aside/modify the CID demonstrates the CFPB’s ability, at least at the CID stage, to extend its initial enforcement activity into consumer financial products that may indeed not be CFPB regulated consumer financial products or services, and in the case of a structured settlement, actually indirectly tied to an annuity which is a “business of insurance” product. This reach may be of concern to a number of industries, aside from the structured settlements industry, that involve insurance or insurance-like products such as and the life settlements and extended warranty industries. Insofar as the CFPB is seeking to exert enforcement authority over JGW, a secondary market purchaser of structured settlement income stream, it foreshadows the potential of the CFPB to extent its CID authority to secondary markets of other financial products such as the secondary life insurance market.


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