NEW YORK (Legal Newsline) – A key U.S. Supreme Court ruling wasn't enough to convince a federal judge to strike down a federal agency’s investigation of a New Jersey lawyer who operates a debt-collection service and has spent three years and $80,000 fighting.
New York judge Kenneth Karas on Aug. 18 granted the Consumer Financial Protection Bureau’s petition to enforce its Civil Investigative Demand against the Law Offices of Crystal Moroney, who along with the New Civil Liberties Alliance has taken her resistance to court.
Moroney has also sued the CFPB, whose structure was found unconstitutional earlier this year by the Supreme Court because its director could not be fired and essentially answered to no one. But Judge Karas decided after a hearing that didn’t mean the CFPB couldn’t enforce its demands.
“While we are disappointed with the result, we are eager to advance our arguments on appeal, where we hope to vindicate Ms. Moroney’s civil liberties once and for all,” said Michael DeGrandis, senior litigation counsel for NCLA.
The NCLA said it is unclear how this ruling in CFPB’s case will affect Moroney’s case against the CFPB. It previously told Legal Newsline that the CFPB can bankrupt Moroney with repeated demands.
“As long as the CFPB can drag this out, it gives them a much better chance of getting what they want,” DeGrandis said.
Moroney’s case illustrates the risks of giving too much power to agencies that aren’t accountable to elected officials, DeGrandis said. The CFPB first served her with a civil investigative demand in 2017. Creditors hire Moroney to collect long-overdue bills, but if she can’t convince debtors to pay anything she returns them to the creditors for legal action, DeGrandis said.
The CFPB has not explained why it is investigating Moroney.
She largely complied with the agency’s request for thousands of documents about her bill-collecting activities but refused to turn over what she considered privileged information about her clients.
When the agency persisted, she hired a New Jersey legal ethics expert who advised her not to comply, DeGrandis said. She asked her clients if they were willing to waive the privilege, as is their sole right, but they refused, he said.
The CFPB quietly filed a request with the court to enforce its CID in February, saying it was seeking information relevant to a legitimate investigation. Moroney says she only learned about it in September. After she contested it in court and threatened to challenge the constitutionality of the CFPB, the agency withdrew its request, only to file a substantially similar one hours after the court dismissed the first request as moot.
Moroney operates in a heavily regulated field subject to the Fair Debt Collection Act, which sets strict rules about how to contact borrowers and how to interact with credit reporting agencies. The New Jersey Better Business Bureau rates her business an “A-,“ although federal court records show she has been sued by several debtors over the past decade or so.
Moroney still has no idea if the CFPB is pursuing her because of complaints or some other issue, DeGrandis said. When it couldn’t persuade her to turn over information about her clients, the CFPB filed CIDs with those clients, he said. Unlike a subpoena, compliance with a CID is voluntary, although agencies can go to court to try and enforce them.