Whether the Dodd-Frank Act survives the Trump administration remains to be seen. But unless and until that law is revoked, real estate businesses are subject to potentially onerous investigative demands from the Consumer Financial Protection Bureau (CFPB). Here is what you should do if that happens.
The Dodd-Frank Act gives the CFPB jurisdiction over “any transaction with a consumer financial product or service.” Specifically included in the services that fall within the CFPB’s jurisdiction are real estate settlement services. To carry out that jurisdiction, the CFPB is authorized to issue civil investigative demands (CIDs) to “any person” when the bureau “has reason to believe” that that individual “may be in possession, custody, or control of any documentary material or tangible things, or may have any information, relevant to a [consumer] violation[.]” That investigative authority is obviously broad, and it is based on similar authority granted to the Federal Trade Commission (FTC) in its enforcement of laws against unfair and deceptive acts and practices (UDAAP).
Receiving a CID from the CFPB is an incredibly disruptive and expensive experience that will require you to temporarily put aside most other aspects of your normal business.
- Act Fast. By normal litigation standards, the timeline for responding to a CID is incredibly short and relatively inflexible. Negotiations with the CFPB must be scheduled within 10 days of receiving the CID. Responsive materials are supposed to be turned over no later than 10 days after that. Since the scope of a CID is normally broad, these deadlines are almost always unrealistic. So you’ll have to work cooperatively with the CFPB to see how much extra time can be sewn into the schedule.
- Hire Legal Counsel. You should consider hiring more than one law firm to advise you. An ideal legal team would consist of one part RESPA experts; one part white-collar criminal attorneys; and one part electronic-discovery experts. That spread of expertise should give you peace of mind about the different aspects of a CID.
- Put in Place a Legal Hold. As soon as you get a CID, you will need to arrange to have all potentially relevant and responsive materials preserved. That means working with your information-technology personnel and suspending your normal document-retention policies.
- Arrange a Meet-and-Confer. Your initial meeting with the CPFB will be your best opportunity to persuade the bureau about any difficulties you may face in complying with the CID. The failure to cooperate in good faith in that process could result in a waiver of your objections.
- Consider Drafting a Petition Against the CID. Given the shortened timing associated with a CID, you might have to draft and file a formal petition objecting to the demand. That will help preserve your objections, but it may also allow information about the investigation to become public.