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News Now

Washington
Suit Challenges CFPB Constitutionality
WASHINGTON (7/23/13)--The Consumer Financial Protection Bureau is facing yet another challenge to its constitutionality: This time, a pair of plaintiffs are arguing the agency structure insulates it from political accountability and internal checks and balances in violation of the U.S. Constitution.

The suit, filed in the U.S. District Court for the District of Columbia by Connecticut attorney Kimberly Pisinski and a Nevada software firm she contracts with, Morgan Drexen, Inc., alleges that the CFPB has engaged in abusive practices, including:
  • Attempts to regulate the practice of law;
  • Threatening plaintiffs with legal action and using improper and coercive tactics against plaintiffs;
  • Attempts to collect attorney-client protected material; and
  • Making overreaching demands for, and mining of, personal financial information of American citizens.
The plaintiffs have sought an order halting these tactics and declaring CFPB's structure to be unconstitutional, and declaring unconstitutional the provisions of the Dodd-Frank Act creating and empowering the CFPB, according to a complaint.

The suit follows a March 13, 2012 CFPB Civil Investigative Demand (CID) that was issued to Morgan Drexen. Pisinski offers bankruptcy services as part of her practice, and Morgan Drexen has provided debt resolution, bankruptcy, personal injury, mass tort litigation, and tax preparation support services to Pisinski and other attorneys.

The CID sought confidential financial information tied to clients of some attorneys that employ Morgan Drexen's support services, and information from Morgan Drexen CEO Walter Ledda.

The CFPB has threatened enforcement action against Morgan Drexen, and has itself alleged that attorneys supported by Morgan Drexen are in violation of the Telemarketing Sales Rule.

Morgan Drexen denies these allegations.  The firm, according to its complaint, has said that:
  • CFPB did not have jurisdiction over the law practice of the attorneys supported by Morgan Drexen;
  • Fees charged by the attorneys supported by Morgan Drexen for bankruptcy services are not collected in connection with debt settlement and are thus not 'upfront fees' prohibited by the TSR; and
  • The CFPB could not prohibit Morgan Drexen from supporting attorneys who provide services in parallel with debt settlement because this would be tantamount to an outright ban on commercial speech in violation of the First Amendment.


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