A law firm that provides credit counseling services to consumers has filed its answer to a Consumer Financial Protection Bureau suit asking a U.S. district court judge to order the firm to comply with a civil investigative demand. According to Seila Law, LLC, the CID should not be enforced because the bureau is organized in a way that violates the U.S. Constitution and because the CID both exceeds the CFPB’s statutory authority and is excessively broad and burdensome (CFPB v. Seila Law. LLC).
According to the CID, the bureau is investigating whether companies engaged in debt relief services and credit counseling violated the Federal Trade Commission’s Telemarketing Sales Rule or provisions of the Consumer Financial Protection Act. Both the bureau and the law firm say that the firm provided some answers to the seven interrogatories and four document requests; however, the CFPB deemed the response inadequate and filed a suit in the U.S. District Court for the Central District of California seeking a court order (see Banking and Finance Law Daily, June 26, 2017).
Constitutionality. The law firm’s attack on the CFPB’s constitutionality repeats the arguments made in a number of other suits—that an independent agency with a single director who can be removed only for cause violates the Constitution’s separation of powers principles. As a result, the bureau should be declared unconstitutional in its entirety, the firm argues.
Since the CID was issued by an agency that is unconstitutional, it is unenforceable, Seila Law adds.
Statutory authority. The CID itself does not adequately describe the purpose and scope of the bureau’s investigation, the firm says. This is a requirement under the Consumer Financial Protection Act, which says explicitly that a person upon whom a CID is served must be "advised of the nature of the conduct constituting the alleged violation that is under investigation . . ." The CID is a "fishing investigation" that does not provide any notice of what conduct is being investigated or what laws might have been violated, Seila Law complains.
Moreover, the CID violates an exemption in the CFPA that shields activities engaged in by attorneys as part of the practice of law, the firm says. Even if Seila Law provides debt relief or credit counseling services that could be considered to be consumer financial services, it does so only as part of practicing law, the firm asserts. In fact, the CID itself essentially concedes that it seeks information on the firm’s practice of law.
Compliance burden. The CID is "unduly broad, overly vague, and seeks protected information and documents," the firm claims. For example, the demand is ambiguous as to what attorneys, agreements, and services are covered. Also, the demand for fee information would require the firm to provide information about fees for legal services.
Seila Law asserts that even if the CFPB wants only examples of the contracts used by the firm and templates used for communicating with consumers, it still demands information that would breach attorney-client privilege or constitute protected work product.
The case is No. 8:17-CV-01081-JLS-JEM.
Attorneys: Anthony R. Bisconti (Bienert, Miller & Katzman, PLC) for Seila Law, LLC.
Companies: Seila Law, LLC
MainStory: TopStory CaliforniaNews CFPB EnforcementActions
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