The Consumer Financial Protection Bureau filed a lawsuit Monday in a federal district court against Georgia-based Frederick J. Hanna & Associates and its three principal partners for allegedly operating a collection lawsuit mill that uses illegal tactics to intimidate consumers into paying debts they may not owe.
The firm focuses exclusively on collection litigation, and its three principal partners, Frederick J. Hanna, Joseph Cooling and Robert Winter, play active roles in the companys business strategies. The firm performs collections and typically files lawsuits if the efforts do not lead to collections.
The CFPB alleges that the firm produced hundreds of thousands of collection lawsuits against consumers on behalf of its clients, which mainly include banks, debt buyers and credit card issuers.
In a statement, the firm denied the allegations.
"Our law firm takes great pride in its commitment to compliance with all consumer protection laws and state civil procedure and evidentiary laws," according to the statement. "At all times, our firm has faithfully followed the long established legal rules and guidelines set forth under Georgia civil procedure and as established by federal judicial precedent with regard to the Fair Debt Collection Practices Act. We believe the law and evidence will show that; and we look forward to presenting our side of the case to the court at the appropriate time."
The CFPB alleges that between 2009 and 2013 the firm filed more than 350,000 collection lawsuits in Georgia alone and collected millions of dollars each year, often from consumers who may not actually have owed the debts. The CFPB wants compensation for victims, a civil fine and an injunction against the company and its partners.
Violations alleged in the complaint include:
Intimidating consumers with deceptive court filings: The firm files collection suits signed by attorneys when, in fact, the lawsuits are the result of automated processes and the work of non-attorney staff, without any meaningful involvement of attorneys. The resulting lawsuits misrepresent to consumers that they are from attorneys. This process allows the firm to generate and file hundreds of thousands of lawsuits. One attorney at the firm, for example, signed more than 130,000 collection lawsuits over a two-year period.
Introducing faulty or unsubstantiated evidence: The firm uses sworn statements from its clients attesting to details about consumer debts to support its lawsuits. The firm files these statements with the court even though in some cases the signers could not possibly know the details they are attesting to. In a substantial number of cases, when challenged, the firm dismissed lawsuits. Since 2009, the firm has dismissed over 40,000 suits in Georgia alone, and the CFPB believes it does so frequently because it cannot substantiate its allegations.
The CFPB alleges that the defendants violated the Fair Debt Collection Practices Act. Among other things, the FDCPA prohibits making misrepresentations to consumers and prohibits misrepresenting to a consumer that a communication is from an attorney.
The CFPB also alleges that the defendants violated the Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibits deceptive acts or practices in the consumer financial marketplace.