One week before the Consumer Financial Protection Board was to defend its constitutionality in U.S. District Court, the agency filed a lawsuit against the accusing firm and its president.
The CFPB — created three years ago under the Dodd Frank Act — today sued Morgan Drexen, Inc., and its president Walter Ledda, claiming the company charged illegal fees and deceived consumers.
The agency alleges the firm violated the Telemarketing Sales Rule and the Dodd Frank Act by charging an upfront fee for its debt relief services. The suit also charged the company with false and misleading advertising.
Randall K. Miller, Morgan Drexen's attorney, called the suit "procedural gunmanship" designed to derail its own case in federal court.
"There's a disrespect for the D.C. Court that already established a schedule that CFPB lawyers consented to. So it's just an odd decision, and I think it's intended to be a kind of procedural gamesmanship," Miler said.
"Suddenly in the middle of that, they throw this monkey wrench that's obviously intended to divert attention," he said.
Miller also said CFPB incorrectly characterized his client firm as a debt-settlement company. Morgan Drexen never charges upfront fees to consumers and only charges attorneys to provide back-room services.
"We're not allowed to charge an upfront fee for debt settlement services. That's unlawful and that's not what we did," he said.
Separately, Morgan Drexen said "the propriety of Morgan Drexen support services model has been evaluated and confirmed by at least 16 jurisdictions across the country, including state bars and district courts."
Miller said CFPB is retaliating against its critics. "One of the things CFPB was to do was to ensure transparency and choice and instead they are trying to force people out of business," he said.
The conflict between CFPB and Morgan Drexen began two years ago when the agency demanded millions of records in a broad "data mining" effort the government was waging to monitor consumer activity.
The Costa Mesa, California company refused to hand over its records, and was upheld by a federal judge in Florida earlier this year.
On July 23, Morgan Drexen filed suit in U.S. District Court charging that CFPB, which is part of the Federal Reserve System, is immune to normal checks and balances, including congressional oversight.
The firm is seeking a court determination whether CFPB was constitutionally established under the Dodd-Frank law.