By Katalina M. Bianco, J.D.
Consumer Financial Protection Bureau Director Richard Cordray has entered a decision and order denying student loan servicer TransWorld Systems Inc.’s petition to attend a bureau investigatory exam of its former employee, Chandra Alphabet. Under the CFPB’s Civil Investigative Demand, Alphabet is to give oral testimony as to "whether loan holders, servicers, collectors or other persons have engaged or are engaging in unlawful acts and practices relating to the servicing and collecting of private student loan debt in violation of several federal consumer compliance laws, including the Consumer Financial Protection Act, Fair Credit Reporting Act, and Fair Debt Collection Practices Act.
Background. The CFPB scheduled Alphabet’s examination for March 12, 2015, at the United States Attorney’s Office in Atlanta, Ga. TSI counsel requested that the location of the exam be moved, according to TSI, but the bureau denied the request. The day before the examination, Alphabet retained separate counsel, and the examination was cancelled. On April 17, 2015, Alphabet resigned from TSI. Her last day of work was April 24, 2015.
Privileged communications. TSI petitioned the CFPB to attend the examination on the basis of safeguarding communications protected by the attorney-client privilege. TSI contended that in the course of her employment with TSI, Alphabet at times acted as corporate representative for the Trusts division of the company and, as such, was privy to confidential information. The company asserts that the bureau "bears the heavy burden" of proving that communications subject to the attorney-client privilege should be disclosed.
Legal determinations. The petition was denied for three reasons, according to the decision. The first reason is that Director Cordray found that TSI had no standing to petition for the order it is seeking. TSI petitioned under Section 1052(f) of the CFPA (12 U.S.C. § 5562(f)) which provides that a person served with a CID may petition to modify or set aside the demand within 20 days of service. Alphabet was served with the CID, not TSI, and therefore the servicer has no standing to petition.
Second, TSI’s petition was not timely, according to the decision. Alphabet was served, through TSI’s counsel, on or before Feb. 2, 2015. The statutory deadline to file a petition to modify or set aside the CID expired on Feb. 22, 2015, 20 days after service. TSI filed the petition on April 24, 2015.
Finally, the law is clear as to who may be present at an investigational hearing, Cordray said in the decision. Under CFPA 12 CFR 1080.7(c), in investigational hearings the bureau must exclude from the hearing all persons except the person being examined, the person’s legal counsel, the officer taking the testimony, any investigator or representative of an agency conducting the investigation with the bureau, and the person transcribing or recording the testimony. The CFPB Director said that TSI does not have the right to attend the hearing and that the investigators involved do not intend to exercise their discretion to permit TSI to attend.
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