The Consumer Financial Protection Bureau (CFPB) has settled a lawsuit with a Georgia law firm allegedly functioning as a debt-collection mill. As reported by Credit Union Insight, the CFPB and the Georgia law firm agreed on a Stipulated Judgment on December 28.
The CFPB’s lawsuit alleges Georgia law firm Frederick J. Hanna & Associates and its individual principals (collectively, “Hanna”) functioned as little more than a debt-collection mill for over four years. Hanna primarily represented debt buyers and other debt collectors. According to the complaint, between 2009 and 2013, Hanna filed over 350,000 collection lawsuits against consumers. The firm only employed eight to 16 attorneys and relied on “hundreds” of nonattorney staff to review consumer files and prepare lawsuits with almost no attorney involvement. The firm’s attorneys rarely, if ever, spent more than a minute reviewing each complaint prior to filing. As a result, the CFPB alleged, Hanna’s “attorneys did not exercise independent professional judgment in determining whether to file the Georgia Collection Suits or what remedies to seek.” (Compl. ¶18.) Further, the lawsuits allegedly included improper affidavits from the collecting companies, which the CFPB alleged Hanna knew or should have known were signed by persons without personal knowledge of any of the facts presented in the affidavits. Again, Hanna’s attorneys allegedly did not review the affidavits and did not take any independent steps to verify the accuracy or amounts of the debts over which the lawsuits were filed.
After it unsuccessfully moved to dismiss the case, Hanna ultimately agreed to a Stipulated Judgment, under which it admitted no liability but agreed to stringent penalties. Under the Stipulated Judgment, Hanna must pay a $3.1 million penalty to the CFPB within 10 days. Hanna must begin complying with additional terms within 90 days. Most notably, the Stipulated Judgment enjoins Hanna from filing any debt collection lawsuit against any consumer unless Hanna: (1) independently verifies the consumer’s identity and the amount of the debt, (2) obtains certified evidence that the lawsuit’s plaintiff owns the debt, and (3) possesses evidence that the consumer either personally opened or personally used the delinquent account. Additionally, the lead attorney on any given case must personally: (1) access a given consumer’s file, (2) review “original, account-level” information verifying the consumer’s debt, (3) verify that any applicable statute of limitations has not run out and that the debt has not been discharged in bankruptcy, and (4) certify compliance with the Stipulated Judgment. Finally, Hanna must ensure that affidavits filed with a lawsuit: (1) have been signed by a person with personal knowledge of the stated facts, (2) have actually been executed in the presence of a notary, (3) are completely accurate, (4) have been personally reviewed by the person executing the affidavit, and (5) have complied with the Stipulated Judgment.
The suit and subsequent Stipulated Judgment reflect the CFPB’s continued commitment to penalize companies that unjustly seek to collect on unverified consumer debts. Importantly, the suit starkly demonstrates that the CFPB will not hesitate to pursue attorneys acting on behalf of debt collectors when the attorneys are simply churning through cases and not following their ethical obligations to only pursue matters they have a reasonable basis to believe are meritorious.