CFPB Files Lawsuit to Stop Illegal Debt Collection Practices and Deceptive Court Filings

CFPB Files Lawsuit to Stop Illegal Debt Collection Practices and Deceptive Court Filings
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December 28, 2015

An order filed in federal court would settle an illegal debt collection lawsuit between the Consumer Financial Protection Bureau (CFPB) and Frederick J. Hanna & Associates.

The CFPB lawsuit had alleged that the defendants rely on deceptive court filings and faulty evidence to churn out lawsuits. If approved by the court, the order would bar the firm and its partners from illegal debt-collection practices, including filing lawsuits without being able to verify the consumers' debt is owed, and intimidating consumers with deceptive court filings. The order would also require the firm and its principals to pay $3.1 million to the Bureau's Civil Penalty Fund.

The CFPB claims that the firm filed collection suits signed by attorneys when, in fact, there was no meaningful involvement of attorneys. The lawsuits were the result of automated processes and the work of non-attorney staff. The resulting lawsuits misrepresented to consumers that they were from attorneys. This process allowed the firm to generate and file hundreds of thousands of lawsuits. One attorney at the firm, for example, signed over 130,000 debt collection lawsuits over a two-year period.

The firm also used sworn statements from its clients attesting to details about consumer debts to support its lawsuits. The firm filed these statements with the court even though in some cases the signers could not possibly have known the details they were attesting to. In a substantial number of cases, when challenged, the firm dismissed lawsuits. 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 filed today follows an earlier court order issued in July 2015 that rejected the defendants' motion to dismiss the case.

The proposed consent order can be found here, while the full complaint can be found here.