Before a government agency sued a Costa Mesa debt-relief company in federal court in Los Angeles this summer for allegedly conning consumers and charging them illegal fees, the company had sued the agency in Washington, D.C., claiming it is unconstitutional.
The D.C. federal court has now ruled against the company, Morgan Drexen, and in favor of the agency, the U.S. Consumer Financial Protection Bureau (CFPB).
Morgan Drexen Inc. deceived customers by claiming there would be no upfront fees charged and that they would be debt-free in months, which were lies, according to the CFPB. The government agency filed the suit in August on behalf of more than 22,000 customers who were allegedly dinged with millions of dollars in illegal fees. Besides charging for services before debts were settled--a no-no under federal law--no actual services were provided, according to the suit.
The suit produced a statement from Morgan Drexen attorney Randall K. Miller in which he claimed his company "is a support services company not a debt-settlement company," and that no fees were charged to its customers.
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Before that, as a preemptive strike, Morgan Drexen filed a lawsuit in the U.S. District Court for the District of Columbia arguing that the existence of the CFPB violated the U.S. Constitution's edicts on the separation of powers.
But, reports State AG Monitor, the D.C. court ruled that, because Morgan had adequate remedy to address the constitutional question in the enforcement action in LA.
Allowing a party to "independently raise a constitutional challenge that also served as a defense in a pending enforcement action would frustrate the final judgment rule," the court further found.