Federal district court issues ruling on confidentiality in CFPB investigations

Ballard Spahr LLP

The D.C. federal district court recently ruled that the plaintiffs’ names should be redacted in all documents filed in a lawsuit against the CFPB initiated by the plaintiffs. The plaintiffs are a group of businesses and an individual who provide services related to consumer credit counseling and are under investigation by the CFPB. The ruling represents a partial victory for the plaintiffs, who had asked the court to seal the entire case file.

Before the plaintiffs filed their lawsuit, the CFPB had issued a CID to one of the plaintiffs, and the plaintiffs were further told by the CFPB that it was considering enforcement action against all of them. The CFPB had also issued a CID to another company that was alleged to have acted as plaintiffs’ business partner and whose owner was an attorney alleged to previously have been plaintiffs’ counsel. Upon learning that the attorney had agreed to voluntarily provide testimony to the CFPB, the plaintiffs sought the CFPB’s permission for their current attorney to attend the voluntary investigational hearing.

Following the CFPB’s denial of their request, the plaintiffs filed a complaint in federal  district court against the CFPB challenging the CFPB’s denial and an application seeking a TRO to bar the CFPB from proceeding with the hearing without an attorney for the plaintiffs being present. The complaint and application were accompanied by a motion to seal the case in which the plaintiffs argued that sealing the case would protect the plaintiffs from the harm that would result if they were publicly identified as the targets of a CFPB investigation. According to the district court’s opinion, after the court ordered the case temporarily sealed and held a hearing on the TRO application, “events at the hearing largely mooted the case.” The plaintiffs then voluntarily dismissed their complaint, leaving only their motion to seal the case to be decided by the court.

The CFPB opposed the plaintiffs’ request to seal the case, arguing that nothing in the CFPA or CFPB regulations prohibited disclosure of the investigation and that the plaintiffs had not identified any prejudice to them resulting from the disclosure of their identities. Disagreeing with the CFPB, the court observed that “it is not difficult to show how disclosure of the fact that an entity is subject to investigation by federal authorities would inflict non-trivial reputational, and possibly associated financial, harm on that entity.”

Balancing the public interest in access to judicial information against the plaintiffs’ interest in maintaining confidentiality, the court concluded that sealing the entire case was unwarranted. However, it found that it was appropriate “to re-caption this case as a John Doe suit and to afford Plaintiffs the opportunity to submit versions of all of the documents filed to date that redact their names and other identifying information.” According to the court, “[t]his compromise maximizes the amount of information available to the public while still protecting the privacy interest Plaintiffs assert.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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