Consumer Fin. Prot. Bureau v. Accrediting Council for Indep. Colls. & Sch.

• Decision Date: 21 April 2017
• Docket Number: No. 16-5174,16-5174
• Citation: 854 F.3d 683
• Parties: CONSUMER FINANCIAL PROTECTION BUREAU, Appellant v. ACCREDITING COUNCIL FOR INDEPENDENT COLLEGES AND SCHOOLS, Appellee
• Court: U.S. Court of Appeals — District of Columbia Circuit

854 F.3d 683

CONSUMER FINANCIAL PROTECTION BUREAU, Appellant

v.ACCREDITING COUNCIL FOR INDEPENDENT COLLEGES AND SCHOOLS, Appellee

No. 16-5174

United States Court of Appeals, District of Columbia Circuit.

Argued February 2, 2017

Decided April 21, 2017

Lawrence DeMille-Wagman, Senior Litigation Counsel, Consumer Financial Protection Bureau, argued the cause for appellant. With him on the briefs was John R. Coleman, Deputy General Counsel.

Allyson B. Baker, Washington, DC, argued the cause for appellee Accrediting Council For Independent Colleges and Schools. With her on the brief were Andrew Hernacki, Benjamin E. Horowitz, Kimberly Culp Cloyd, and Kenneth J. Ingram, Washington, DC.

Andrew J. Pincus, Ori Lev, Stephen C.N. Lilley, Matthew A. Waring, Kathryn Comerford Todd, and Steven P. Lehotsky, Washington, DC, were on the brief for amicus curiae The Chamber of Commerce of the United States of America in support of appellee.

Michael C. Gartner, Falls Church, VA, was on the brief for amicus curiae Accrediting Council for Continuing Education & Training, Inc. ("ACCET"), et al. in support of appellee.

Before: Henderson and Wilkins, Circuit Judges, and Sentelle, Senior Circuit Judge.

Sentelle, Senior Circuit Judge:

The Consumer Financial Protection Bureau ("CFPB" or the "Bureau") issued a civil investigative demand to the Accrediting Council for Independent Colleges and Schools ("ACICS"), a non-profit organization that accredits for-profit colleges. The civil investigative demand's "Notification of Purpose" stated that the CFPB sought information relating to "unlawful acts and practices in connection with accrediting for-profit colleges." When ACICS refused to comply, the CFPB filed a petition to enforce the civil investigative demand. The district court denied the petition. Because the civil investigative demand did not comply with the governing statute, see 12 U.S.C. § 5562(c)(2), we affirm.

I.

While the Department of Education does not accredit for-profit colleges, the Secretary of Education recognizes national accrediting agencies that set accreditation standards for those for-profit institutions. See Prof'l Massage Training Ctr., Inc. v. Accreditation All. of Career Schs. & Colls. , 781 F.3d 161, 171 (4th Cir. 2015) ; Urquilla-Diaz v. Kaplan Univ. , 780 F.3d 1039, 1044 (11th Cir. 2015) ; see also 20 U.S.C. § 1099b ; 34 C.F.R. §§ 602.1 –602.50. Indeed, the term "[a]ccredited" is defined in the Department's regulations as "[t]he status of public recognition that a nationally recognized accrediting agency grants to an institution or educational program that meets the agency's established requirements." 34 C.F.R. § 600.2 ; see also id. § 602.3. Recognized accrediting agencies are intended to be "reliable authorities regarding the quality of education or training offered by the institutions or programs they accredit." Id. § 602.1(a) ; see also 20 U.S.C. §§ 1001(c), 1099b(a). Importantly, students at accredited for-profit colleges are eligible to receive federal student aid funding. See 20 U.S.C. § 1002(b)(1)(D) ; 34 C.F.R. § 600.5(a)(6) ; Career Educ., Inc. v. Dep't of Educ. , 6 F.3d 817, 817–18 (D.C. Cir. 1993) ; see also Urquilla-Diaz , 780 F.3d at 1043–44.

ACICS is a non-profit organization that accredits for-profit colleges in the United States. A council consisting of fifteen commissioners carries out the organization's accreditation functions, while the organization's president, who also serves as the Chief Executive Officer, oversees the day-to-day operations. The Secretary has recognized ACICS as a national accreditor since 1956, although the Secretary withdrew ACICS's status as a recognized accreditor in 2016.

The most important aspect of ACICS's accreditation process is the "peer review" component, which involves volunteer evaluators from ACICS member institutions and non-member institutions reviewing other institutions. The confidential accreditation process includes a self-evaluation by the institution, an on-site visit, a review of the institution's operations, and a written report from the evaluators. After determining whether the institution complies with ACICS's accrediting standards, the council makes a final accrediting decision. Relevant to this litigation, ACICS asserts that, as an accrediting agency, it plays no role in the student loan process.

The CFPB has investigated for-profit colleges for deceptive practices in connection with their student-lending activities. See, e.g. , CFPB v. Corinthian Colls., Inc. , No. 1:14-cv-7194, 2015 WL 10854380 (N.D. Ill. Oct. 27, 2015) ; CFPB v. ITT Educ. Servs., Inc. , No. 1:14-cv-292, 219 F.Supp.3d 878, 2015 WL 1013508 (S.D. Ind. Mar. 6, 2015). On August 25, 2015, the CFPB issued a civil investigative demand ("CID") to ACICS. The CID's "Notification of Purpose" stated:

The purpose of this investigation is to determine whether any entity or person has engaged or is engaging in unlawful acts and practices in connection with accrediting for-profit colleges, in violation of sections 1031 and 1036 of the Consumer Financial Protection Act of 2010, 12 U.S.C. §§ 5531, 5536, or any other Federal consumer financial protection law. The purpose of this investigation is also to determine whether Bureau action to obtain legal or equitable relief would be in the public interest.

The CID included two interrogatories seeking to identify: (1) "all post-secondary educational institutions that [ACICS] has accredited since January 1, 2010," and (2) "all individuals affiliated with [ACICS] who conducted any accreditation reviews since January 1, 2010" for twenty-one enumerated institutions. The CID also informed ACICS that a company representative must be made available to provide oral testimony on ACICS's "policies, procedures, and practices relating to the accreditationof" seven enumerated institutions.

After receiving the CID, ACICS's counsel conferred with the CFPB to discuss compliance. These discussions proved fruitless, however, and ACICS subsequently petitioned the CFPB to set aside or modify the CID. See 12 U.S.C. § 5562(f) ; 12 C.F.R. 1080.6(e). The CFPB's Director, Richard Cordray, denied ACICS's petition on October 8, 2015, and ordered ACICS to meet and confer with the CFPB. The CFPB denied ACICS's motion for reconsideration of that denial on October 27, 2015, and on October 29, 2015, filed the petition for enforcement that is the subject of this appeal. See 12 U.S.C. § 5562(e).

The Bureau argued in its petition that it had "reason to believe" that ACICS, in its capacity as an accreditor, possessed "information relevant to the Bureau's investigation" into "whether any entity or other person has engaged or is engaging in unlawful acts and practices in connection with accrediting for-profit colleges, in violation of the [Consumer Financial Protection Act], or any other Federal consumer financial law." ACICS opposed the petition on a number of grounds, including that the Bureau's investigation into the accreditation of for-profit colleges was outside the scope of its authority.

The district court denied the petition. CFPB v. Accrediting Council for Indep. Colls. & Schs. , 183 F.Supp.3d 79, 80 (D.D.C. 2016). The court framed the issue before it as a single question: "Did the CFPB have the statutory authority to issue the CID in question?" Id. at 82. "Unfortunately for the CFPB," the court held, "the answer is no." Id. After reviewing the CFPB's statutory authority, see id. at 82–83, the court noted that the laws enforced by the CFPB do not "address, regulate, or even tangentially implicate the accrediting process of for-profit colleges," id. at 83. The court concluded that, "at first blush, the CID's statement of purpose appears to concern a subject matter that is not within the statutory jurisdiction of the CFPB." Id. Based on the Notification of Purpose and the requests, the court further determined that the CFPB's investigation "clearly ... targets the accreditation process generally," which "the CFPB was never empowered to do." Id. at 83–84. Because the CFPB "plow[ed] head long into fields not clearly ceded to [it] by Congress," the court denied the petition. Id. at 84. The CFPB appealed.

We have jurisdiction pursuant to 28 U.S.C. § 1291. See FTC v. Invention Submission Corp. , 965 F.2d 1086, 1089 (D.C. Cir. 1992) ; FTC v. Texaco, Inc. , 555 F.2d 862, 873 n.21 (D.C. Cir. 1977) (en banc).

II.

Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") in the wake of the financial crisis of 2008 and 2009. State Nat'l Bank of Big Spring v. Lew , 795 F.3d 48, 51 (D.C. Cir. 2015) (citing Pub. L. No. 111-203, 124 Stat. 1376 (2010) ). Title X of the Dodd-Frank Act—the Consumer Financial Protection Act ("CFPA")—established the Consumer Financial Protection Bureau to "regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws," 12 U.S.C. § 5491(a), and "to implement and ... enforce Federal consumer financial law," id. § 5511(a); see also id. §§ 5492(a), 5511(b)–(c). The "Federal consumer financial law" that the CFPB enforces includes the CFPA and eighteen pre-existing consumer protection statutes. Id. § 5481(12), (14); Morgan Drexen, Inc. v. CFPB , 785 F.3d 684, 686–87 (D.C. Cir. 2015). Relevant to our analysis, the CFPA prohibits "unfair, deceptive, or abusive act[s] or practice[s] under Federal law in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service." 12 U.S.C. § 5531(a) ; see also id. § 5536(a)(1)(B). "Consumer financial product[s] or service[s]" include consumer loans and debt collection activities. See id. § 5481(5), (15).

The CFPA vests the Bureau with broad "rulemaking, supervisory, investigatory, adjudicatory, and enforcement authority...." Morgan Drexen , 785 F.3d at 687 (citing 12 U.S.C. §§ 5512(b), 5514 –5516, 5562 –5564 ). One of the CFPB's "primary functions" is to "supervis[e] covered...