CFPB Files Complaint Against Debt-Collection Law Firm for Alleged FDCPA and CFPA Violations

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On May 17, 2019, the CFPB filed a complaint against a law firm for alleged violations of the Fair Debt Collection Practices Act (FDCPA) and the Consumer Financial Protection Act (CFPA) when the firm engaged in mass litigation in which it filed allegedly deceptive debt-collection lawsuits against consumers, misrepresenting that attorneys were meaningfully involved in preparing or filing the lawsuits (which instead allegedly significantly relied on non-attorney support staff, automation, and a cursory and deficient account file review process).

The law firm has for decades, on behalf of debt buyers and creditors, collected debts incurred primarily for personal, family, or household purposes, and therefore, according to the CFPB’s complaint, it falls within the definition of “debt collector” under the FDCPA and “covered person” under the CFPA.  The complaint focuses on the more than 99,000 collection lawsuits the firm filed between 2014 and 2016, signed by a handful of attorneys.  As alleged in the complaint, the firm relied heavily on non-attorney staff and automated processes in determining the accounts for which it would take legal action during this timeframe, generally describing the process as starting with an automatic scrub for software to determine whether a collection action could proceed, then having the firm’s non-attorney staff try to collect on the consumer accounts and, if the staff did not receive a response from a consumer, they would determine whether the account was “suit-worthy.”  The complaint further alleges that those accounts were then scrubbed again against bankruptcy, deceased, and military databases and that those files that met certain requirements were sent to a firm partner who would review the files for “obvious” reasons to reject a lawsuit on that account, such as recent payment or a bankruptcy filing.  If approved past that point (more than 90% of accounts under this partner review were approved), the complaint alleges that an associate attorney then would conduct a similarly cursory review, potentially lasting no more than a few minutes, before approving and signing a complaint.  During this process, the complaint alleges that the firm relied upon information available on the account, potential staff notes on the account, and any documents provided by clients upon account placement, if available, but that the firm historically had not received any original or supporting documentation from its clients before the firm filed suit (though the extent that the firm possessed such documentation increased over time).  Thus, the process allegedly did not involve a review of things like account applications, billing statements, copies of payments, payment histories, cash-advance check copies, the terms and conditions governing an account, consumer correspondence, or warranties or disclaimers of warranties related to debt sales, and generally did not include further investigation or verification of information like the validity or accuracy of a debt before filing suit.  As generally alleged in the complaint, the lawsuits for the consumer accounts that survived the described process had the names and signatures of attorneys, despite those attorneys not being meaningfully involved in reviewing the merits of the lawsuits, including conducting any inquiry into the facts, or in preparing the pleadings.

The complaint further noted that the law firm filed claims on behalf of creditors and debt buyers with whom the CFPB had entered into consent orders after accusing these entities of engaging in unlawful debt-collection practices, such as alleging that consumers owed amounts they did not actually owe.  The CFPB’s complaint against the law firm states that, despite these consent orders, the law firm has engaged in activities such as not investigating or verifying the summary information that served as the basis for the firm’s lawsuits, not conducting reviews for contractual disclaimers related to debt sales, and not requesting supporting documentation for many of those accounts for which lawsuits were filed.

The CFPB’s complaint alleges that the firm violated the CFPA and the FDCPA by collecting or attempting to collect on debt through lawsuits that falsely represented to consumers that these lawsuits were from attorneys when attorneys were not meaningfully involved in preparing or filing the lawsuits.

Among other things, the complaint requests that the court permanently enjoin the firm from committing future violations of the FDCPA and CFPA, award damages or other monetary relief against the firm, order the firm to pay redress or restitution to consumers harmed by its unlawful conduct, order the firm to give back all ill-gotten gains, and impose civil money penalties on the firm.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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