CFPB director Richard Cordray.
CFPB director Richard Cordray. (Photo: Diego M. Radzinschi/ALM)

The Consumer Financial Protection Bureau is facing a new test to the scope of the agency’s power, as a “John Doe” company heads to court to block the public disclosure of its name while fighting an investigation into its core business practices.

The company, which has ties to California, offers “pension advance” products that allow consumers to receive a lump sum payment in exchange for a portion—or all—of their future pension. The CFPB has warned of potential pitfalls of these products, saying pension advances “can eat into your retirement income.”

On Tuesday, the company, identified only as “John Doe Company,” filed suit in the U.S. District Court for the District of Columbia to push back against the CFPB investigation. CFPB Director Richard Cordray earlier refused to set aside a “civil investigative demand” for information, and the agency plans to publicly disclose documents as early as Friday that reveal the company’s name.

The CFPB backed off that timeline Wednesday, agreeing at a hearing to “take no action adverse” against the company through at least Feb. 10. The court order prevents the CFPB from publicizing the company’s identity. The agency has until Jan. 25 to respond to the company’s request for a temporary restraining order, along with its request to litigate the case under a pseudonym.

The company, represented by the firms Womble Carlyle Sandridge & Rice and Dorsey & Whitney, said in the lawsuit that the CFPB’s subpoena is asking for “essentially every business and financial record” the firm had generated. And the company said disclosure of its name will cause “irreparable harm” to the business.

“The publication of this investigation will itself cause plaintiff to go out of business and will harm hundreds of innocent people, including plaintiff’s employees and agents,” the company said in court papers.

It’s not the first time the CFPB and a company have fought over secrecy. Fearing reputational harm, companies have argued that their names should be kept secret during an investigation. Last year, a credit repair company and four other firms convinced a Washington judge to keep their identities secret.

CFPB Authority Tested

In the complaint Tuesday, the unidentified company leaned heavily on an October appeals court ruling that struck down the CFPB’s single-director structure as unconstitutional.

The company argues that the CFPB’s subpoena is unlawful because the structure of the bureau itself was declared unconstitutional. The CFPB has appealed the panel ruling to the full U.S. Court of Appeals for the D.C. Circuit.

The pension advance company urged U.S. District Judge Rudolph Contreras to stop the CFPB from taking any further action against it until either the president has the power to remove the CFPB director at will—rather than for cause—or “the bureau is otherwise brought into compliance with the Constitution.”

“The Constitution requires that the bureau take no further action against plaintiff, including publication of plaintiff’s petition, until the separation of powers violation identified by the D.C. Circuit has been remedied,” the company’s defense lawyers argued.

The company’s suit is the latest test of the reach of the CFPB’s subpoena power. The CFPB is fighting in several other federal courts across the country to enforce its civil investigative demands.

In April 2016, a federal judge in Washington stopped the CFPB from pursuing an investigation into the Accrediting Council of Independent Colleges and Schools, an accreditor that has been faulted for lax oversight of for-profit colleges. The judge said the CFPB lacked authority to probe the college accreditation process, a decision the agency has appealed.

Update: This article was updated with additional information from a hearing Tuesday in the dispute.