In what appears to be the first decision to address the scope of authority of the Consumer Financial Protection Bureau (CFPB) in the higher education context, last Thursday (April 21, 2016) a federal district court in Washington, DC held the CFPB had no authority to issue a Civil Investigative Demand (CID) to the accreditor, Accrediting Council for Independent Colleges and Schools (ACICS). The court found troublesome the CID’s language stating the purpose of the CID was to “determine whether any entity . . . has engaged . . . in unlawful acts and practices in connection with accrediting for-profit colleges.” Consumer Financial Protection Bureau v. Accrediting Council for Independent Colleges and Schools, No. 15-1838, 2016 U.S. Dist. LEXIS, 53644 at 7 (D.D.C. April 21, 2016).
ACICS contended the CFPB had no statutory authority to conduct an investigation into the accreditation process of for-profit schools. CFPB argued because it had authority to investigate schools in relation to their lending and financial-advisory services, it also had authority to investigate whether any entity has engaged in any unlawful acts relating to the accreditation of those schools.
As the court stated, CFPB’s “post-hoc justification is a bridge too far!” Consumer Financial Protection Bureau at 8-9. The accreditation process has no connection to a school’s private student lending practices, nor is the accreditor, ACICS, involved in the financial aid decisions of the schools it accredits. For these and other reasons, the court found CFPB lacked authority to investigate the process for accrediting for-profit schools, and the CID was denied.