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CFPB Charges Debt Collection Firm $3.1M for Robo-Lawsuits

WASHINGTON – The Consumer Financial Protection Bureau is charging thelaw firm Frederick J. Hanna & Associates $3.1 million over allegations that it illegally filed debt collection lawsuits against consumers.

The CFPB's proposed order, filed Monday in federal court, accuses the Georgia-based firm and three of its partners of using "deceptive court filings and faulty evidence" to churn out debt collection lawsuits against consumers. The consent order, if approved by federal court, requires the firm and the named partners to pay a $3.1 million civil money penalty.

"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 in a press release. "Debt collectors that use the court system for purposes of intimidation should reconsider how their practices are harming consumers."

The firm's three partners who were cited in the consent order are Frederick Hanna, Joseph Cooling and Robert Winter.

The CFPB accused the firm of "intimidating" consumers by filing debt collection lawsuits that appeared like it was signed by an attorney when it was actually an automated process that involved the work of nonattorney staff.

"This process allowed the firm to generate and file hundreds of thousands of lawsuits," the CFPB said. "One attorney at the firm, for example, signed over 130,000 debt collection lawsuits over a two-year period."

The agency also accused the law firm of filing sworn statements from its clients who attested against a consumer with outstanding debt even though some of the clients could not have known such details.

"In a substantial number of cases, when challenged, the firm dismissed lawsuits," the CFPB said. "Between 2009 and 2014, the firm dismissed over 40,000 suits in Georgia alone, and the CFPB believes it did so frequently because it could not substantiate its allegations."

The proposed consent order would resolve the lawsuit against Hanna which the CFPB filed in July 2014. The defendants had filed a motion to dismiss the case but the court rejected the request in July 2015. The CFPB noted that the action is a part of a larger sweep to end wrongful debt collection practices, including both buyers and sellers.

"For instance, in separate enforcement actions, the CFPB has ordered three of the Hanna law firm's clients, JPMorgan Chase, Portfolio Recovery Associates, and Encore Capital Group, to overhaul their debt collection practices and to refund millions to harmed consumers," the CFPB said in a press release. "The bureau will continue working to ensure all players in the collections market treat consumers fairly."


(1) Comment



Comments (1)
From Mark Dobosz - Executive Director at NARCA - The National Creditors Bar Association

NARCA member Frederick J. Hanna & Associates, PC. (Hanna) and its individual members, Frederick J. Hanna, Joseph C. Cooling and Robert A. Winter, entered into a Stipulated Final Judgment and Order concluding its seventeen-month litigation with the Consumer Financial Protection Bureau. While Hanna has agreed to monetary penalties, there has been no admission of liability on the part of Hanna or its members; further both parties agree that there has been no adjudication of any issue of fact or remaining issues of law arising from the conduct alleged in the CFPBs complaint.

NARCA understands that many consent orders are entered into because the cost of fighting is overwhelming and believes that the current consent order falls in that category.

The Consent Order continues the trend of federal agencies treading upon the separation of powers by trying to regulate the litigation activities of lawyers who turn to the courts in order to help recover unpaid consumer debts. The right to petition for redress through the courts is a constitutional right guaranteed by the First Amendment, and the courts are fully empowered to make sure that this right is exercised in a fair and just manner for all parties in each lawsuit. Lawyers are officers of the court who must answer to the court for the way they conduct litigation.

At the same time, to the extent that the CFPB has the authority to regulate debt collection litigation, law firms require regulatory certainty and even-handed enforcement, so that they can do the longer-term planning critical for growth and success. While consent orders can provide some guidance to creditor law firms, the biggest takeaway from enforcement complaints and settlement agreements is that the Bureau knows unlawful activity when it sees it. Without clear and concise rules, industry is forced to scramble to figure out what is acceptable.

As the National Creditors Bar Association, NARCA is in the forefront of representing member law firms who adhere to the laws, regulations and rules required of creditors rights attorneys. In doing so, NARCA members not only fulfill their responsibility to zealously represent their clients, but also serve to assist consumers by providing solutions to their legitimately incurred debt. NARCA members are more than willing to follow clearly promulgated rules and regulations that do not conflict with the state and local rules of civil procedure and local court rules.
Posted by mdobosz1 | Tuesday, December 29 2015 at 11:45AM ET
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