Before leaving for summer, House Financial Services Committee Republicans released a legal analysis concluding that there is sufficient basis for Congress to initiate contempt proceedings against Consumer Financial Protection Bureau (CFPB) Director Richard Cordray.

The report argues that Cordray failed to fully comply with a committee subpoena for documents related to the CFPB’s final arbitration rule, in which the CFPB bans financial institutions from preventing consumers from joining class-action lawsuits through pre-dispute resolution clauses.

Specifically, the report states that Cordray failed to comply with Specifications 19 and 20, which state the following:

• Specification 19 requires production of:“All communications relating to pre-dispute arbitration agreements between the CFPB and any of the following entities: (i) American Association for Justice; (ii) National Consumer Law Center; (iii) National Association of Consumer Advocates; (iv) Alliance for Justice; or (v) Public Justice.”

   

• Specification 20 commands production of:“All communications from one CFPB employee to another CFPB employee relating to pre-dispute arbitration agreements.”

The report said  the requests have been outstanding for 471 days.

“Majority committee staff finds that Director Cordray has failed to comply with Specifications 19 and 20 of the committee’s subpoena and there is a valid legal and factual basis for instituting contempt of Congress proceedings against Director Cordray to enforce Specifications 19 and 20,” the report states.

Specifications 19 and 20 were  sent to the CFPB on April 4, 2017.

On April 24, 2017, eight days before all responsive records were required to be produced under the Subpoena, CFPB Counsel Anne Tindall sent an email to committee counsel that stated : “We’ve discussed your proposal to transcribe any negotiations between your staff and ours regarding compliance with the committee’s April 4, 2017, subpoena, and we must decline.  Subjecting negotiations between staff to written transcription would mark a significant and unwarranted departure from accommodations processes developed and maintained over the course of many decades, and would be out of step with the time-honored and constitutionally based comity between coequal and independent branches of government. Further, the chilling effect this approach would have on staff discussions would diminish their utility. We hope you will reconsider this abrupt change in staff-to-staff negotiations. Until such time, we will communicate about the committee’s subpoena and the bureau’s response via email.” 

The committee responded that it was disappointed that the bureau would not speak with the committee on the phone if that conversation was transcribed and reiterated that the “subpoena has issued.”

According to the report, the CFPB did not respond to this email, nor did anyone from the CFPB contact the committee again about the subpoena before the CFPB hand-delivered its response (the Return) to the committee office May 2, 2017.

“On the subpoena return date of May 2, 2017, for Specification 19 the CFPB merely reproduced records that it had already produced to the committee on June 24, 2016, and directed the committee to certain notices of ex parte communications in the CFPB arbitration rulemaking record,” the report states. “The CFPB did not produce any records in response to Specification 20 with the Return. At no time has the CFPB sought an extension of the subpoena’s return date or taken the committee up on its repeated offers (in this case long predating the subpoena) to provide the predicate detailed showing necessary to support possible modifications of Specifications 19 or 20 via a key custodian or other approach. And, as to Specifications 19 and 20, the Return presented no cognizable legal arguments sounding in privilege, protection, or otherwise, that would relieve Director Cordray of his legal obligation to produce all records responsive to the subpoena.”

On May 11, 2017, committee counsel informed the CFPB that the committee considered Cordray to have made “complete default” as to the subpoena. According to the report: Cordray made no attempt to cure his default until May 26, 2017, when the CFPB wrote committee counsel that “we remain eager and available to discuss the scope of the April 4 subpoena’s specifications at a staff level, via continued correspondence or other appropriate means.” 

The CFPB disputed the default in another email.

“The email appears to take the position that all the CFPB was required to do in response to the subpoena was to make a ‘robust’ production,” the report states. “The email also appears to take the position that full compliance with the subpoena was not and is not required. It appears to staff that the CFPB’s position was and is that while the CFPB is ‘eager to cure any inadvertent deficiencies in its productions or simply to provide additional information that would assist the committee’ it is the committee’s duty to ‘clearly and specifically identify the records or information it believes are missing from these productions.’

“Relevant to Specifications 19 and 20, the email also seems to make the claim that in instances where the CFPB has cited burden, it is the committee’s obligation to ‘provide’ guidance to alleviate that burden,” the report adds. “Staff concludes that the CFPB’s legal positions are directly contrary to Supreme Court precedent.”