A court has ruled that the Consumer Financial Protection Bureau attempted to exceed its congressional authority when it made investigative demands on a higher education accrediting council. It’s the first time a court has said the CFPB, created to supervise the financial services industry, reached beyond its authority.

The U.S. District Court for the District of Columbia held that the CFPB did not have the authority to issue its civil investigative demand (CID) to the Accrediting Council for Independent Colleges and Schools (ACICS). But the ruling may not prevent the CFPB from continuing an investigation into the accreditation of for-profit colleges; the agency might instead revise the CID language.

John Culhane Jr., a partner in the Philadelphia office of Ballard Spahr and contributor to its CFPB Monitor blog, says the case is significant because it marks the first time a court has rejected a CFPB attempt to assert jurisdiction. Culhane says the CFPB will be more careful in drafting its CIDs to explicitly assert its authority to undertake investigations.

"If you step back from this case, you might see that they are trying to treat the accreditation counsel as if it was like a rating agency, contributing to problems that rating agencies were alleged to have done with mortgage-backed securities," he said. "But they didn’t lay out the foundation for that kind of a claim."