A District Court judge in New York has sided with the Consumer Financial Protection Bureau and agreed to enforce a Civil Investigative Demand that was sent to a collection law firm, a decision that the law firm’s lawyer has said will be appealed.
The CFPB’s case against the Law Office of Crystal Moroney began more than three years ago when the CFPB sent the firm a CID as it began an investigation into the firm’s collection practices. The law firm, according to the CFPB, failed to fully comply with the CID, which led the agency to seek a federal judge to compel compliance. The law firm fought back, questioning the constitutionality of the CFPB as grounds for its non-compliance. The CFPB opted to abandon that case and avoid the legal fight over its constitutionality at the time. But hours after it dropped the case, the CFPB filed a new CID with the law firm, which it said was “nearly identical” to the original request.
The law firm was attempting to argue that the Supreme Court’s ruling in Seila Law v. CFPB, in which the Court ruled the leadership structure of the CFPB was unconstitutional, rendered any enforcement action taken by the agency during its lifetime as unenforceable.
But Judge Kenneth Karas of the District Court for the Southern District of New York disagreed with the law firm’s argument following a telephonic hearing yesterday.
In a press release following the hearing, the attorneys representing the law firm indicated that this was the first time that a judge has granted ratification where the ratifier knew what she was doing was unconstitutional in the first instance. Kathleen Kraninger, the director of the CFPB, had announced back in September 2019 — months before the new lawsuit was filed against the law firm — that the CFPB’s leadership structure was unconstitutional.
“It took Ms. Moroney three years and $80,000 — to say nothing of the stress and strain on her personal and professional life — to finally get her day in court to defend against the CFPB’s unconstitutional structure and abusive practices,” said Michael DeGrandis, one of the attorneys representing the law firm, in a statement
