United States District Court, E.D. Michigan, Southern Division
OPINION AND ORDER GRANTING PETITION TO ENFORCE CIVIL
INVESTIGATIVE DEMANDS 
G. Edmunds United States District Judge
November 29, 2016, Petitioner Consumer Financial Protection
Bureau (the "Bureau") petitioned this Court to
enforce Civil Investigative Demands ("CIDs") that
the Bureau issued to Respondents on September 8, 2016.
(Id.) For the reasons that follow, the Bureau's
petition is GRANTED.
Bureau is a federal agency that regulates the provision of
consumer financial products and services. 12 U.S.C. §
5491(a). Its functions include investigating and enforcing
violations of federal consumer financial laws. Id.
§ 5511. As part of an investigation, the Bureau may
issue CIDs, a form of administrative subpoena that can direct
recipients to produce documents, other materials, answers, or
oral testimony. Id. § 5562(c). The Bureau is
now before the Court because it issued CIDs to Respondents,
and Respondents refused to comply. The Bureau seeks an order
main issue here, according to Respondents, is whether the
Bureau's investigative authority extends to
Respondents' selling, marketing, and servicing of a
financial product called an Agreement for Deed
("AFD"), also called a "contract for
deed" or a "land installment contract." (Dkt.
13-1; Dkt. 1-6.) Respondents are involved with AFDs as
follows: Respondent Harbour Portfolio Advisors, LLC
("Harbour") purchases foreclosed properties and
resells them to consumers through AFDs. (Dkt. 13, at 1-2.)
Respondent National Asset Advisors, LCC ("NAA")
manages and markets, among other properties, residences that
Harbour sells through AFDs. (Dkt. 14, at 4.) And Respondent
National Asset Managers, LLC ("NAM") is a mortgage
provider and collector of installment payments that services
Harbour's AFDs. (Id. at 4-5.)
itself is a written agreement to purchase residential
property, whereby the seller agrees to deliver a deed to the
purchaser upon full payment of the purchase price. (Dkt.
13-1, at 6.) Respondents have submitted two versions of the
AFDs used by Harbour. (See Dkt. 13-1.) Respondents
claim that Harbour began to "phase out" the first
AFD in November 2014 and now uses the "revised"
version. (Id. at 3.) The biggest difference between
the two is that the first AFD includes an accompanying
promissory note that contains an acceleration clause, while
the revised AFD includes no such note. Otherwise, their terms
are largely the same.
the original AFD and the revised version, the purchase price
is fixed and amortized over a number of years, with interest
accruing on the outstanding balance at a fixed rate.
(Id. at 6, 14.) The purchaser's obligations
include a down payment, followed by monthly payments for the
term of the AFD until the full purchase price is paid.
(Id. at 6, 14.) Furthermore, the purchaser agrees to
pay property taxes and keep the property insured throughout
the AFD's duration. (Id. at 6, 15-16.) If the
purchaser chooses to stop making payments or defaults on its
obligations, then the seller may terminate the AFD and retain
the previous payments in full satisfaction and liquidation of
all damages. (Id. at 7, 14.) The seller remains the
legal owner until the purchase price is paid. (Id.
at 8, 16.)
to Respondents, neither version of the AFD involves a loan or
debt, and the purchaser is never obligated to pay the full
purchase price. However, as stated above, the first AFD is
accompanied by a promissory note that includes an
acceleration clause. (Id. at 10.) Such a clause
causes the full price to become due and payable if the
purchaser misses a payment and the seller chose to exercise
the clause. (Id.) And while Harbour's Manager
filed an affidavit stating that Harbour has never sought to
exercise the acceleration clause (id. at 4), the
Bureau has submitted evidence that suggests otherwise.
(See Dkt. 16-2.) This evidence includes pleadings
from a Florida lawsuit where Harbour alleges that it made a
"loan, " describes its transaction documents as
"Loan Documents, " asserts that a "Note was in
default and accelerated, " and demands payment of unpaid
principal, interest, and other fees. (Id. at 9-10.)
Bureau first heard testimony regarding Harbour's
financial products and services in May 2016, when
Harbour's Manager responded to a CID that is not at issue
here. (Dkt. 1-2.) Four months later, the Bureau served
Respondents with the CIDs currently before the Court. These
CIDs bear the stated purpose of "determin[ing] whether
investment firms or other unnamed persons have been or are
engaging in unlawful acts or practices relating to the
marketing, offering, servicing, or collection of loans for
the purchase of residential properties, or similar products
and services[.]" (Dkt. 1-7; Dkt. 1-8; Dkt. 1-9.)
Respondents received the CIDs, counsel for the Bureau
communicated over telephone with counsel for each Respondent
to discuss compliance. (Dkt. 1-3 at ¶¶ 9, 11.) All
three Respondents indicated that they would not comply
because they believed that the Bureau exceeded its authority
in issuing the CIDs. (Id.) Each Respondent then
filed a petition with the Bureau to set aside the CIDs.
(Id. at ¶¶ 10, 12.) Around a month later,
the Bureau's Director denied Respondents' petitions
and ordered them to comply with the CIDs within 10 days.
(Dkt. 1-8; Dkt. 1-9.) As of November 29, 2016, Respondents
still had not complied, so the Bureau filed this petition
seeking enforcement. On December 1, 2016, the Court ordered
Respondents to show cause why the Court should not grant the
petition. Both sides then submitted briefs, and the Court
held a hearing on the matter. Now the Court is prepared to
grant the Bureau's petition.
district court "is not a 'rubber stamp' for
agency demands for the production of information, " its
role in deciding whether to enforce CIDs is limited.
United States v. Markwood, 48 F.3d 969, 979 (6th
Cir. 1995) (applying the test for enforcing administrative
subpoenas to CIDs because a CID is "at its essence, a
subpoena issued by an administrative agency"). In the
Sixth Circuit, a CID is "properly enforced" so long
as (1) it satisfies the terms of its authorizing statute; (2)
the materials requested are relevant to the agency's
investigation; (3) the information sought is not already in
the agency's possession; and (4) enforcing the subpoena
will not constitute an abuse of the court's process.
Doe v. United States, 253 F.3d 256, 265 (6th Cir.
oppose enforcement of the CIDs on three grounds. First,
Respondents argue that the Bureau exceeded its statutory
authority in issuing the CIDs. Second, Respondents argue that
they did not receive fair notice that AFDs are covered by
federal consumer financial laws. Third, Harbour individually
argues that, if the Bureau does have the authority to issue
the CIDs, the CID issued to Harbour should be modified
because it is unduly ...