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CFPB Seeks to Enforce CID against Debt Collection Law Firm

The CFPB has filed a request in the District Court for the Southern District of New York to enforce a civil investigative demand (“CID”) against the Law Offices of Crystal Moroney, P.C. (“LOCM”), a debt collection law firm located in New City, New York, continuing under Director Kraninger the CFPB’s pursuit of law firms despite the fact that such entities are generally exempt from the CFPB’s enforcement authority under section 1027(e) of Dodd-Frank.

Originally issued on June 23, 2017, the CID was part of the CFPB’s investigation into LOCM’s potential violations of the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. It sought answers to 21 interrogatories, seven requests for written reports, 15 requests for documents, and four requests for other “tangible things” by July 21, 2017. While LOCM initially provided responses to at least some of the CFPB’s requests and engaged in discussions with respect to potential modifications and extensions to the CID, the CFPB now alleges that LOCM refuses to answer the remaining requests “based on its interpretation of certain rules of professional responsibility” for New York and New Jersey. The exact nature of the requested information is unclear, but the CFPB further alleges that it relates to telephone calls, written correspondence with consumers, credit reporting disputes, and LOCM’s contracts with its clients.

Unsurprisingly, the CFPB’s filing does not attempt to refute LOCM’s assertion that it is prevented from responding due to its professional obligations. It instead uses formulaic language declaring its “power of inquisition” where “the investigation is being conducted for a legitimate purpose, that the inquiries may be relevant to that purpose, that the information sought is not already within the [its] possession, and that [applicable] administrative steps [are followed].

While LOCM’s response is likely to provide additional detail as to the ethical defenses on which it relies, we have long been concerned with the potential for the CFPB to use its broad CID powers to infringe on professional obligations such as attorney-client privilege. This filing is a keen reminder to financial institutions of that risk.

Copyright © by Ballard Spahr LLP

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About this Author

Jason Cover, Ballard Spahr Law Firm, Philadelphia, Finance Law Attorney
Associate

Jason M. Cover is an associate in the Business and Finance Department and a member of the Consumer Financial Services Group. As part of his practice, he provides counsel with respect to regulatory and transactional issues arising from state and federal consumer finance laws, including, among others, the Truth in Lending Act (TILA), Equal Credit Opportunity Act (ECOA), Servicemembers Civil Relief Act (SCRA), Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), Electronic Fund Transfer Act (EFTA), Electronic Signatures in Global and National...

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