By Katalina M. Bianco, J.D.
The Consumer Financial Protection Bureau has denied J.G. Wentworth, LLC’s, petition to modify or set aside a civil investigative demand issued by the bureau in 2014. The petitioner’s argument that the CFPB lacks jurisdiction over Wentworth because the company’s structured settlement and annuity payment purchasing activities that are the subject of the CID and outside the scope of the Consumer Financial Protection Act and Truth in Lending Act do not merit setting aside the CID, the bureau determined.
Petitioner’s arguments. Wentworth argued that its business activities are not covered activities under the CFPA because the company is not a covered person under the CFPA and its conduct does not fall within the scope of the Act’s provisions on unfair, deceptive, or abusive acts and practices. According to the petition, Wentworth provides liquidity to customers by purchasing future streams of income, such as structured settlement and annuity payments. Wentworth directly purchases these future fixed payments in exchange for a single up-front cash payment negotiated with each seller. When the company purchases the right to receive future settlement or annuity payments from a customer, no money is lent, no credit is extended, and no money is owed by the customer that must be repaid, the petitioner stated. Therefore, the conduct does not come within the meaning of consumer financial product or service as provided in the CFPA.
Further, because no money is lent to consumers and no credit is extended, Wentworth’s activities do not give rise to a TILA violation.
Finally, Wentworth argues that the CFPB has previously conducted discovery sufficient to determine that it lacks jurisdiction to issue the CID.
CFPB position. The bureau’s response, written by CFPB Director Richard Cordray, outlines the ways in which the petition is lacking in merit. First, the argument that Wentworth is not a covered person under the CFPA because it does not offer or provide a financial product or service is “misplaced.” The CFPA authorizes the bureau to issue CIDs to "any person" who may have information "relevant to a violation," Cordray noted. Because this authority extends to covered persons, service providers, or any other person who may possess relevant information, the company's argument does not relate to the scope of the CFPB's investigative authority. In addition, Cordray wrote, the company may well be engaging in conduct that brings it under the definition of covered person if the company is providing consumers with financial advisory services to assist in determining whether a structured settlement transaction is in their best interest. Wentworth acknowledged in its petition that the definition of financial product or service" under the CFPA includes "providing financial advisory services…to consumers on individual financial matters."
Wentworth’s argument that the CFPB lacks jurisdiction to issue the CID because the purchase of structured settlement and annuity payments does not constitute an extension of credit subject to TILA is a substantive defense that does not address the scope of the CFPB's investigative authority, according to Cordray. The director said that he did not need to address the merits of this argument “at this stage.”
As for the company’s argument that the CFPB has conducted discovery sufficient to determine that the bureau lacks jurisdiction to issue the COD, Cordray answered that because he had already concluded that the bureau does not lack jurisdiction to issue the CID, the point is moot.
Cordray ordered Wentworth to produce all responsive documents, items, and information to the bureau within 21 calendar days of the decision and order.
For more information about CFPB CIDs, subscribe to the Banking and Finance Law Daily.
