The electronic ankle bracelet that Nefi Flores had to wear for three years before he reached a settlement with Libre by Nexus in April. (Stuart Palley/For The Washington Post)

The federal government is investigating a Virginia-based company accused of preying on detained undocumented immigrants.

The Consumer Financial Protection Bureau is looking into whether Libre by Nexus has engaged in “unfair, deceptive, or abusive acts and practices,” according to documents the bureau posted to its website recently.

Libre by Nexus denied any wrongdoing in documents posted to the bureau’s website and in a statement to The Washington Post.

“Only in the alternate universe in which the CFPB operates could a company such as Libre — which has rescued tens of thousands of people from unsafe detention centers, and saved hundreds of millions of tax payer dollars — be chastised for its efforts to protect and uplift the very people that the CFPB claims to protect,” the company said. “This inquiry, by an unconstitutional agency with no statutorily prescribed regulatory authority over our company, is an obvious political attack against Libre by Nexus and the immigrants we serve.”

A spokesman for the bureau said it could not comment on investigations.


Mike Donovan, president and co-founder of Libre by Nexus, talks about his business at its headquarters in Verona, Va. (Norm Shafer/For The Washington Post)

Libre was already under scrutiny in at least two states after a Washington Post investigation of the company's business practices.

Libre by Nexus helps post bond for people being held in immigration detention centers while they wait for their cases to be heard in backlogged courts. In exchange for their freedom, immigrants sign contracts promising to pay Libre $420 per month while wearing the company’s GPS ankle devices.

Those contracts have been the subject of lawsuits and allegations of fraud by immigrants who say they didn’t understand them.

The CFPB was created by Congress after the 2007 mortgage lending crisis to regulate banks, payday lenders and other financial institutions.

Part of its investigation into Libre appears to focus on whether the company is acting as a lender without proper oversight, according to the documents posted online.

In a civil investigative demand, or CID, sent to the company on Aug. 22, the bureau sought records on Libre’s more than 15,000 current and former clients “to determine whether persons who provide products or services related to bonds posted on behalf of detainees are extending credit or offering to extend credit.”

“The purpose of this investigation is also to determine whether such persons, in connection with marketing or selling those products or services to consumers or enforcing their terms and conditions, have engaged or are engaging in unfair, deceptive, or abusive acts and practices,” the demand continued.

Last month, Libre filed a petition to block the bureau’s demand, arguing that the company does “not offer or provide consumer financial products or services, and therefore, [is] not subject to the demands of the CFPB.”

The company also argued that the bureau’s demand was “excessively vague and overbroad” and would cost 8,060 hours of work and $204,160 to fulfill. Instead of turning over the records requested, Libre offered to provide examples of contracts or “a random sampling of Program Participant contracts and payment information.” It also asked that the bureau keep its investigation confidential.

In an Oct. 11 response to the petition, however, bureau Director Richard Cordray rejected Libre’s arguments and demanded that the company produce all the records within 10 calendar days.

The bureau “is authorized to issue CIDs to ‘any person’ who may have information ‘relevant to a violation,’ ” he wrote. “Determining whether an entity is engaged in unfair, deceptive, or abusive acts or practices requires understanding its business practices and, where these practices vary, can require understanding the practices and representations of different employees of the company. As such, the CID’s requests for basic information about Nexus’s employees and clients are highly relevant to the purpose of the investigation. Nexus’s proposed alternatives of providing sample contracts or a random sampling of client data would, by contrast, not provide sufficient information for the Bureau to form an adequate picture of Nexus’s activities.”

Cordray’s decision was posted online Thursday, along with Libre’s petition.

In its statement, Libre said it planned to challenge the decision and what it called “unconstitutional, illegitimate attempts to harm our company and our clients.”

The bureau’s investigation is not the first inquiry into the company’s business practices.

Immigration and Customs Enforcement investigated Libre by Nexus three years ago but concluded that the company was not breaking the law.

Libre by Nexus calls itself the “only hope” for detainees who cannot afford their bond and don’t have a car or home to put up as collateral. The company — with more than 6,500 clients, 200 employees and yearly revenue of $30 million — acts as a middleman, using GPS monitoring instead of collateral to persuade bond agencies to post bail for detainees.

“Soaring immigration bond prices have forced immigrants to languish behind bars for extended periods of time,” the company said earlier this year. “Nexus has helped reunite families with loved ones detained in immigration centers, creating a better path forward for the immigrant community.”

The Post article detailed the struggles of Libre clients to pay the monthly fee for the device. Most said Libre employees threatened them with being returned to ICE custody if they didn’t pay.

The company’s chief executive, Mike Donovan, denied those allegations, saying its contracts were clear and consensual and that employees did not threaten clients.

In February, two Honduran immigrants filed a class-action complaint against the company in U.S. District Court in Northern California, arguing that Libre “preys on detainees’ vulnerability and limited understanding of English to foist crushing financial terms and GPS shackles on detainees.”

A different lawsuit that made similar claims against the company was settled in April in Los Angeles County.

In May, Rep. Norma J. Torres (D-Calif.) introduced the Stop Predatory Bail Contracts Act aimed primarily at protecting undocumented immigrants who turn to companies such as Libre for help in getting out of ICE custody.