The Supreme Court yesterday denied a petition from a defunct collection law firm fighting a Civil Investigative Demand from the Consumer Financial Protection Bureau, deciding that one challenge to the Bureau’s funding structure was enough for now.
The petition was filed by The Law Office of Crystal Moroney after the Court of Appeals for the Second Circuit last year upheld a lower court’s ruling that granted the CFPB’s petition to force the law firm — which is no longer in operation — to respond to the CID. In its ruling, the Second Circuit said the CFPB’s funding structure was constitutional.
Two weeks ago, the Supreme Court issued a ruling in which it determined that the Bureau’s funding structure — in which it receives its funding directly from the Federal Reserve instead of through the Congressional appropriations process — is constitutional.
The CFPB’s case against Moroney began more than six years ago when the CFPB sent the firm a CID as it began an investigation into its 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 experiences of Petitioner and Crystal Moroney well illustrate the abuses that can arise when an Executive Branch agency is funded outside the congressional appropriations process and thus faces no budgetary constraints,” Moroney wrote in her petition. “CFPB has been hounding Petitioner and Moroney to respond to discovery requests since 2017; those requests were a major factor in Petitioner’s decision to close its doors. CFPB required Moroney to sit for a deposition in 2022. It has not told Petitioner and Moroney that it is satisfied with the response to the Second CID or that it has completed its investigation of their activities. Yet throughout the past six years, it has told neither Petitioner nor Moroney that either is suspected of violating any federal debt-collection law. It is difficult to imagine that an agency would squander its resources so profligately if it were subject to normal budgetary constraints.”
