The Consumer Financial Protection Bureau this week struck back against a company that's challenging the constitutionality of the agency's structure, arguing in court papers that the plaintiffs "utterly fail to show that the Bureau's authority is out of step with that exercised by other federal regulatory agencies."
Morgan Drexen, which works with law firms to provide debt relief services to consumers, sued the CFPB last month in U.S. District Court for the District of Columbia, alleging that the agency's structure violates the violates the "Constitution's separation of powers given: (1) the extraordinary scope of power delegated to CFPB; and (2) the lack of political oversight and necessary checks and balances."
But the CFPB in a motion to dismiss argued that Morgan Drexen's claim is "completely unmoored not only from precedent, but also from any separation-of-powers principle," and that the agency is accountable to the president, Congress and the courts.
Now, the agency says the constitutional issues should be decided as part of the enforcement case, which is pending in California federal court, and not in Morgan Drexen's complaint, currently pending before U.S. District Judge Colleen Kollar-Kotelly.
"Notwithstanding Morgan Drexen's efforts to beat the Bureau to the courthouse, it is in the enforcement action that Morgan Drexen should be required to present its constitutional claims," the CFPB stated in its motion to dismiss. "All of the legal issues that bear on Morgan Drexen's liability, including the constitutional issue that Plaintiffs raise here" can be decided in the California case.
The CFPB began investigating Morgan Drexen early last year. In April 2013, the agency informed the company that it was considering bringing an enforcement action, according to the CFPB. But before the agency filed suit, Morgan Drexen and attorney Kimberly Pisinski sued the CFPB and asked the court to bar the CFPB from taking any action against them "until after the final hearing in this matter."
To the CFPB, "the only conceivable purpose for bringing this action is an inappropriate one.... Rewarding Plaintiffs' conduct with an adjudication on the merits would not be consistent with the equitable principles that govern 'wise judicial administration.'"