Kimberly Pisinksi, a Connecticut bankruptcy attorney, and Morgan Drexen Integrated Systems, her outsourced legal support services provider, filed a lawsuit in federal court accusing the Consumer Financial Protection Bureau of overstepping its authority by asking them to turn over privileged and sensitive information related to thousands of Pisinki's clients who are considering bankruptcy.
Morgan Drexen officials say the information requested includes names, addresses, phone numbers, amount of debt owed, income total and a list of creditors and essentially all other financial obligations. Morgan Drexen says it is "improper and unethical for the CFPB to data mine the personal and confidential information of financially distressed consumers considering bankruptcy." The CFPB also wants details of when clients talked to their attorney, the type and nature of the contact and for how long.
Moira Vahey, a CFPB spokeswoman, told The Wall Street Journal that the request for information is within the agency's authority and consistent with the course of a government investigation. The goal, she said, is simply to learn whether companies are following the law and to seek appropriate remedies when they're not.
Morgan Drexen provides outsourced, third-party services to businesses nationwide, as well as attorneys. The firm first learned from the CFPB that it was under investigation in 2012. While it cooperated, in April the CFPB told Morgan Drexen it now faces an official legal action.
The firm began preparing its suit and brought in one of its clients, Pisinksi, to serve as an additional plaintiff since many of the records involved her clients.
Morgan Drexen has a Web site allowing interested parties to follow the case.
In May, Morgan Drexen was fined $6.1 million by the state of Wisconsin for allegedly violating consumer protection laws regarding debt negotiation. The firm is fighting that action.