Last month, the Consumer Financial Protection Bureau (CFPB or Bureau) denied Pacific Rim Alliance Corporation’s (Pacific Rim) petition to set aside a second civil investigation demand (CID) issued to the company on the basis that the CID was overly broad and unduly burdensome. Not only did the CFPB disagree with Pacific Rim’s representation regarding the burden imposed, it also found that the company did not meaningfully engage in the meet-and-confer process.

The CFPB represents that its CID seeks information to determine whether short-term or small-dollar lenders: (a) improperly induced borrowers to take out, renew, or refinance loan products that harmed them; (b) misrepresented the full, long-term costs of serially rolling over, renewing, or refinancing their loan products; or (c) misrepresented that their loans are short-term obligations despite being structured and serviced in a manner that renders them longer-term obligations for many borrowers.

According to its petition, “Pacific Rim is a women-owned business, offering small dollar loans to consumers in five western states.” The petition also noted that the company “is small and getting smaller.” During the applicable period of the CID, the company closed 20 of its 58 stores and shed one-half of its work force. Pacific Rim asserted in its petition that it had already spent $82,500 (45% of its net 2022 income) responding to document requests and providing testimony in response to a 2022 CID and the cost of responding to the newly issued 2023 CID and any follow-up requests would likely be catastrophic to the company.

In its decision, the CFPB stated that in an effort to reduce the burden on the company, the Office of Enforcement proposed that Pacific Rim initially only respond to a subset of questions that would allow the Office to further tailor the CID. “In response, Pacific Rim said that it would not discuss any specific request” and instead requested that the Bureau withdraw the 2023 CID entirely or stay the time permitted for compliance indefinitely. “Simply insisting that a CID be entirely withdrawn does not amount to ‘meaningful[] engage[ment]’ in the type of good-faith negotiation that is necessary for a meet-and-confer to be productive.”

The CFPB also found that the company had not established that the cost of compliance would be excessive noting: “Pacific Rim has not substantiated its claim that complying with the CID would ‘threaten to put the [c]ompany out of business altogether.'”