News

CFPB faces new challenge to constitutionality

July 24, 2013

Richard Cordray may have prevailed in the skirmish over his appointment as director of the Consumer Financial Protection Bureau, but the battle over the agency's very existence goes on.

On Monday, a company under investigation by the CFPB lashed back at the bureau, challenging its constitutionality in a lawsuit filed with the U.S. District Court in the District of Columbia, according to a CUNA News Now report.

The suit was filed by Connecticut attorney Kimberly Pisinski and Morgan Drexen Inc., a Nevada software firm that provides support services to Pisinski and other attorneys.

The plaintiffs were the targets of a civil investigative demand issued in March 2012 by the CFPB as it attempted to uncover confidential information about certain bankruptcy clients represented by attorneys who contracted with Morgen Drexen.

Allegations against the CFPB include:

• attempts to regulate the practice of law;
• threats of legal action and the use of improper and coercive tactics against the plaintiffs;
• attempts to collect attorney-client protected material; and
• overreaching demands for, and mining of, personal financial information of American citizens.

For its part, the CFPB has alleged that attorneys who use Morgen Drexen services are in violation of the Telemarketing Sales Rule that protects consumers from fraudulent telemarketing calls in addition to certain protections under the National Do Not Call Registry.

In a Wall Street Journal report, CFPB spokeswoman Moira Vahey defended the investigation. "We believe this work is within our authority and consistent with the ordinary course of a government investigation," said Moira Vahey, a CFPB spokeswoman. "Our goal is to determine whether companies are complying with the law and seek appropriate remedies where that's not the case."