The Consumer Financial Protection Bureau responded Friday to collection law firm Frederick J. Hanna & Associates' motion to dismiss a lawsuit that charges the firm with operating a collection lawsuit mill.
The CFPB's July lawsuit charges Atlanta-based Hanna & Associates and its three principal partners with filing more than 350,000 collection lawsuits between 2009 and 2013 in Georgia alone and collecting millions of dollars each year. Often, the consumers may not have owed the debts, according to the suit. The CFPB seeks compensation for victims, a civil fine and an injunction against the firm and principal partners Frederick J. Hanna, Joseph Cooling and Robert Winter.
The law firm countered last month with a motion to dismiss, stating that the CFPB's claims are barred because the Dodd-Frank Act prohibits it from bringing claims against a lawyer for conduct that constitutes the practice of law. The CFPB's claims revolve solely around the practice of law, the firm stated.
The firm argued that the CFPB further failed to state a claim under the Fair Debt Collection Practices Act or Dodd-Frank, because there is no standard under federal law requiring "meaningful attorney involvement" in filing a lawsuit. That standard arose in connection with debt collection letters and has no application to lawsuits filed in court, the firm stated.
The CFPB's response on Friday: "What is most striking about the motion to dismiss is the theme that underlies almost every argument: lawyers, particularly debt collection lawyers, are above federal law. [The] defendants ... point to the First Amendment and argue that the [CFPB's] claims would unduly burden their fundamental right, as lawyers, to file lawsuits. They contend, based on the Fifth Amendment, that the [CFPB's] claims would violate their equal protection rights by impermissibly treating debt collection lawyers, like themselves, differently from other lawyers. And they make other arguments based on a supposed 'principle' that regulating lawyers has been reserved for the states, or the quaint notion that lawyers, through state bar associations, should be allowed to police themselves.
"Congress sees things differently. It has passed laws, particularly the [FDCPA] and the Consumer Financial Protection Act of 2010 (CFPA), to hold lawyers accountable for their deceptive and unfair debt collection practices, even when they are engaged in state court litigation. These laws are fatal to every one of [Hanna's] arguments."
Hanna & Associates has denied the CFPB's claims in the lawsuit including "the overall mischaracterization of our law firm as a mill or factory." The firm said it has fully cooperated with the CFPB in the year leading up to the CFPB's lawsuit, including logging thousands of man hours helping the CFPB review the law firm's practice.
"Our law firm takes great pride in its commitment to compliance with all consumer protection laws and takes great pains to ensure compliance with state civil procedure and evidentiary laws, step by step," officials with the law firm stated. "At all times, our firm has faithfully followed the long established legal rules and guidelines set forth under the Georgia Civil Practice Act and the long line of established 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 law firm's motion to dismiss, addressing specific lawsuit claims, states that the CFPB failed to identify any example of it ever filing an affidavit from a client that "lacked personal knowledge," or any facts where it could be inferred that the firm was aware of any such affidavits.
The motion further argues that the CFPB's attempt to bring claims going back to 2009 is barred by the one-year statute of limitations in the FDCPA and the non-retroactivity of Dodd-Frank, which became effective in 2011.
The CFPB argued in the Friday response that none of the claims against Hanna are time barred and that FDCPA language discussing a statute of limitations must not be read as limiting the government's right to enforce the law. In the following statement, the CFPB cites previous court decisions.
Even if the textual reading is not clear, "principles of statutory construction would require the court to read the statute in the [CFPB's] favor. This canon is rooted in the traditional rule time does not run against the King. In the absence of a congressional enactment clearly imposing a limitations period, the United States, in its governmental capacity, is not subject to one. Here, [FDCPA] limitations period does not clearly impose a restriction on government enforcement actions, and therefore must not be construed to do so."
That statement, specifically the reference to a monarchy, likely will pique the interest - and raise the collective eyebrows - of the debt collection industry.