The Law Offices of Crystal Moroney in Rockland County and the federal Consumer Financial Protection Bureau have filed a new round of legal demands in a three-year stalemate over debt collection records.
CFPB petitioned U.S. District Court in White Plains on April 24 for an order compelling Moroney to produce records it has been seeking since 2017, in an investigation of abusive debt collectors.
Six days later, Moroney filed an amended complaint in the same courthouse, challenging the very legitimacy of the agency to do its job.
The law firm “has been subject to an ongoing series of investigative and enforcement manipulations, delays and dirty tricks,” the complaint states, “that beggar belief in the good faith of the agency.”
The Moroney firm, established in 2013 and based in New City, represents clients trying to collect delinquent debts. It tries to amicably negotiate payment terms, according to the Moroney complaint, and it furnishes information about debtors to credit reporting agencies, according to the agency.
Three years ago, CFPB demanded voluminous records from Moroney for an investigation of whether debt collectors are engaging in unfair, deceptive or abusive practices. Court records do not indicate whether the agency suspected Moroney or its clients of wrongdoing.
The law firm produced many redacted records, according to court filings, but it drew the line at confidential client information, arguing that the information is protected by attorney-client privilege.
Last year, CFPB asked the court to compel the firm to produce the records. In November, days before a scheduled hearing, the agency withdrew its petition, seemingly ending the dispute.
Hours later, it filed a new, nearly identical petition for the same records.
Moroney petitioned the agency director to set aside the demands, on constitutional grounds, or to modify the requests for records.
The law firm argued that CFPB, as an autonomous, independent bureau, is insulated from the checks and balances of the executive and legislative branches.
“The rules it makes, the policies it promotes, the enforcement and investigation activities it undertakes, and the quasi-judicial power it exercises,” Moroney contends, “are all shaped and tainted by the unchecked and absolute power of an unconstitutional and unaccountable director.”
In February, the agency’s director, Kathleen L. Kraninger, responded that the agency itself was not the proper forum for deciding constitutional issues.
She said Moroney failed to make a good faith effort to negotiate a resolution with the agency’s staff or to submit specific requests in writing.
Moroney had been given a December deadline to produce records.
“Ms. Moroney is not obligated to respond,” her attorney, John H. Bedard Jr. of Duluth, Georgia, stated in a March 19 email to the agency, citing his client’s constitutional arguments. “The law office will not be responding.”
Now, for the second time, CFPB is asking federal court to make Moroney produce records.
Moroney claims the agency is targeting legal companies, such as payday lenders, whose businesses it finds objectionable.
The agency allegedly uses tactics to choke off business, by pressuring businesses to disclose confidential information, dragging out the regulatory process, stigmatizing the business and intimidating clients.
The process itself is meant to be a punishment, the law firm alleges. Just six days after the agency made its second demand for records, according to Moroney’s complaint, CFPB demanded records from a client, FedChex Recovery LLC.
Moroney claims that the agency’s actions have driven it to the brink of insolvency. Eight of its 17 employees have been laid off. It is renting an office month-to-month, to avoid a long-term commitment. Ms. Moroney reduced her salary from $155,000 to $104,000.
Moroney is asking the court to declare the CFPB unconstitutional and to set aside all actions it has taken against the firm.
“Only the judicial branch – and this court in particular – can restore plaintiff’s civil liberties,” the complaint states, “by reestablishing constitutional order and commanding respect for plaintiff’s due process rights.”