CFPB Sues Collection Law Firm To Compel Compliance with CID

The Consumer Financial Protection Bureau has filed a lawsuit against a collection law firm, seeking to compel the firm to comply with a civil investigative demand letter related to possible violations of the Fair Debt Collection Practices Act, while the firm is asserting that the agency is looking for documents that are covered by attorney-client privilege and work product privilege.

A copy of the petition and some of the supporting documents in the case of Bureau of Consumer Financial Protection v. Law Office of Crystal Moroney can be accessed by clicking here.

This marks the first contested lawsuit filed by the CFPB under director Kathy Kraninger, according to a published report.

The CFPB sent the law firm a CID back in July 2017, but almost immediately, the firm responded with a request to modify the documents and information sought by the bureau and to extend the deadline to provide that information. The law office has “partially responded” to the CID, the CFPB says in its petition, but has indicated it will not fully comply, because doing so would place Moroney “in violation of her obligations under professional responsibility rules for New York and New Jersey, where she is admitted to practice law.”

Among the documents being withheld, according to the CFPB, are

  • telephone calls and written correspondence with consumers from whom it attempts to collect debt,
  • disputes by consumers concerning the firm’s credit reporting activities to third-party credit reporting agencies, and
  • contracts for services with creditors on whose behalf the firm collects debt

In a letter sent to the CFPB enforcement attorney in charge of the case shortly after the CID was received and following a meeting with representatives from the CFPB, Ronald Canter, an attorney representing Moroney’s firm, said “The CID commands Ms. Moroney and the Firm to produce documents and information protected by the attorney-client privilege and the attorney work product privilege.” The conflict, between complying with the laws of New York as they pertain to privilege and the information requested in the CID “appears irreconcilable,” Canter wrote.

For reasons not disclosed, the CFPB appears to have not done anything to compel compliance with the CID for nearly a year and a half — which coincides with the tenure of former acting director Mick Mulvaney. The original CID was sent when Richard Cordray was still running the CFPB.

“This is certainly an unusual choice for Kraninger’s first contested lawsuit – because of the substantive breadth of the underlying CID, the non-specificity of the Notification of Purpose, the novel arguments regarding the Rules of Professional Conduct, and, most strikingly, the agency’s delay in taking action,” writes Ori Lev from Mayer Brown, who classifies the CID as “a typically broad CFPB CID from that era”. “Time will tell if this lawsuit is a harbinger of a different enforcement philosophy or simply action on old matter taken as part of clearing out a backlog.”

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