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Credit Card Applications » News » Legal » The CFPB Cracks Down on an Illegal Debt Collection Lawsuit Mill

The CFPB Cracks Down on an Illegal Debt Collection Lawsuit Mill

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The CFPB Cracks Down on an Illegal Debt Collection Lawsuit Mill
December
31

Just before the new year the Consumer Financial Protection Bureau (CFPB) filed a consent order with the federal court against the Frederick J. Hanna & Associates and its three partners, seeking to bar the Georgia-based law firm, specializing in debt litigation, from continuing to engage in illegal debt collection practices.

These practices included filing deceptive court papers to intimate consumers, and providing inaccurate financial data to mass produce lawsuits. The law firm originally caught the eye of the CFPB last year.

If the order is approved it would prevent them from intimidating consumers with legal proceedings and stop them from moving forward with cases unless they can verify how much consumers actually owe. The order would also mandate the payment of $3.1 million to the Bureau’s Civil Penalty Fund by the law firm and its partners.

“The Hanna firm relied on deception and faulty evidence to coerce consumers into paying debts that often could not be verified or may not be owed,” said CFPB Director Richard Cordray. “Debt collectors that use the court system for purposes of intimidation should reconsider how their practices are harming consumers.”

The details and the history

The Hanna law firm’s clients included credit card issuers and banks, as well as companies that buy and sell consumer debt. The consent order filed by the CFPB would resolve this case, and the law firms alleged violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

During their investigation the CFPB found that the firm made two key transgressions:

Using deceptive court filings to intimidate consumers: The CFPB believes that the firm filed collection suits signed by attorneys without attorneys actually having any real involvement in the process. The filings were the end result of an automated system and put together by staff that were not attorneys, yet were presented to people as if they were filed by actual lawyers. Using this system resulted in one of the firm’s attorneys signing more than 130,000 debt collection lawsuits during a two-year period.

Presenting inaccurate or uncorroborated evidence: The CFPB also alleges that the firm used sworn statements from the clients they represent about different aspects of people’s debt, even though in some cases they had no way of knowing the details included in the statements. If these details were challenged, the firm would drop the lawsuits. In the five-year period between 2000 and 2014 they dropped more than 40,000 lawsuits in Georgia. According to the CFPB they believe that this occurred because they could not verify their allegations.

The clean up

Due to the Dodd-Frank Act, the CFPB has the ability to take on institutions or individuals that take part in unfair, deceptive, or abusive practices. If the order they filed against The Hanna law firm is approved the law firm will have to stop their illegal collection practices, clean up how their attorneys do business, stop deceptive court filings, and pay the penalties.

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