financial lawBack in February we blogged about Acting Chair Ohlhausen’s first keynote address in which she outlined her three consumer protection priorities. Consistent with those priorities, in April, the Federal Trade Commission (FTC) announced its agenda to eliminate wasteful, unnecessary regulations and processes. Within the FTC’s Bureau of Consumer Protection, the FTC’s goals included an effort to streamline demands for information in investigations and improve transparency in its investigations.

Last week, the FTC announced process reforms following up on the Ohlhausen agenda. In a press release, the FTC described Bureau of Consumer Protection (BCP) process reforms addressing the use of Civil Investigative Demands (CIDs)—which are administrative subpoenas used to collect information and documentation in investigations. These reforms, designed to minimize burden and increase transparency, include:

  • Provide plain language descriptions of the CID process and develop materials to help small businesses understand how to comply;
  • Add more detailed descriptions of the scope and purpose of investigations to give companies a better understanding of the information the agency is seeking;
  • Where appropriate, limit the relevant time periods to minimize undue burden on companies;
  • Where appropriate, significantly reduce the length and complexity of CID instructions for providing electronically stored data; and
  • Where appropriate, increase response time for CIDs to improve quality and timeliness of compliance by receipts (for example, extend response time for targets from 21 days to 30 days and 14 days to 21 days for third parties).

The second bullet point above—addressing the “descriptions of the scope and purpose of investigations” set forth in CIDs—may have been prompted by a recent D.C. Circuit decision where the court found a CID issued by the Consumer Financial Protection Bureau (CFPB) to be invalid due to the vague and unspecific nature of what is referred to as the “notification of purpose.” Both the FTC and CFPB are required, by statute, to “state the nature of the conduct constituting the alleged violation which is under investigation and the provision of law applicable to such violation.” However, these notifications of purpose tend to be broad, generic, and open-ended, rarely giving the recipient sufficient information or notice about the nature of the investigation.

Although the DC Circuit did not articulate a standard for what is sufficient notice, it did send a signal to the FTC and CFPB that notices that are perfunctory in nature simply do not cut it. Depending on how the FTC implements this change, it could be one of the most important improvements to the BCP processes.

How the new “CID v2.0” will look is still unclear, but we think these changes are a step in the right direction for both effective agency enforcement and cooperation by companies it is investigating.