The CFPB recently issued its third consent order involving a debt collection law firm and appears to be expanding its interpretation of “meaningful involvement”. The order, which was entered against two related debt collection firms and their principal, calls into question how debt collection firms fundamentally conduct business. See In the Matter of Works & Lentz, Inc., et al, File No. 2017-CFPB-0003. The order was entered without any admission of any facts or conclusions of the law except those required for jurisdiction. The consent order requires the firms to pay $$577,135 in restitution to consumers, engage in remediation of their business practices, and pay a $78,800 civil penalty.

The Consent Order alleges the law firms violated the FCPA and Regulation V (the FCRA) as follows:

  • By failing to have attorneys meaningfully involved in the account prior to engaging in collection efforts;
  • Where no attorney had reviewed the account, by sending demand letters and engaging in collections without including a disclaimer that no attorney had yet reviewed the account;
  • By allowing collectors to identify themselves as calling from a law firm where no attorney had yet been meaningfully involved in reviewing the account at issue;
  • By including an automated greeting for unanswered calls indicating that the caller had reached the law firm where not attorney had yet been meaningfully involved in reviewing the account at issue;
  • By notarizing affidavits executed by clients without properly verifying the signatures; and
  • By furnishing information to credit reporting agencies with having written policies and procedures in place to insure compliance with the FDCPA.

The Consent Order expands the expectations previously set forth by the CFPB in its two prior consent orders with law firms by impliedly setting forth the expectation that attorneys must be meaningfully involved with each account prior to initial demand letters being sent out and further limits the delegation that may be made to staff.

It requires that, “in connection with the collection of a debt, if any attorney has not been meaningfully involved in reviewing the consumer’s account at issue and has not made a professional assessment of the debt”, the law firm may not:

  • State or imply that a written communication in connection with the collection of a debt, including a demand letter, is from an attorney or on behalf of an attorney;
  • State or imply that a phone call in connection with collection of the debt is from or on behalf of an attorney;
  • Refer to “attorneys” or a “law firm” in any automated message that plays for consumers calling the firm regarding a debt;
  • State or imply an attorney has reviewed the account; or
  • State or imply that the firm may file suit or seek legal action.

Instead in those instances,

  • The law firms must include in all demand letters or written communications with the consumer:
    • A disclaimer that no attorney has reviewed the account at issue,
    • State in the signature block that the letter is from the “Collections Department” and
    • Omit the name of any attorney and the phrase “Attorney at Law” from the signature block.
  • In any oral communications,
    • Include a disclaimer that no attorney has been reviewed the account at issue; and
    • Clearly identify the person making the call, his job title and identify themselves as being from the “Collections Department”.
  • The firms may not refer to the potential of litigation or commence suit unless and until:
    • An attorney has reviewed original account level documentation which includes at a minimum, the consumer’s name, the last four digits of the account number and the claimed amount, a document signed by the consumer evidencing the opening of the account or original account level documentation reflecting a purchase payment or actual use by the consumer or other documentation authorizing the creation of the account;
    • Has made a professional assessment of the delinquency; and
    • Obtained client consent to file suit on the specific account.

The order is problematic on a number of levels. First, the CFPB’s utter disdain for collection attorneys is apparent in its discussion of their contingent fee arrangements and concerns with use of the firm’s name in the automated recordings. To the point, by prohibiting the law firms from identifying themselves as such when there has not been meaningful attorney involvement with the account and no "professional assessment" has been made, the Consent Order effectively requires the law firm to violate 15 U.S.C. 1692e by not disclosing the true name of the debt collector. To counteract that concern, the Order makes it implicitly clear that attorneys will need to be meaningfully involved at the intake point forward and yet fails to clearly articulate what that means. Remember, that the Hanna Consent Order set the expectation that that Hanna have in hand account documentation before engaging in collection efforts, but did not require the law firm document their meaningful involvement except prior to filing suit. The current consent order suggests that is not enough.

Debt collection law firms should assess risk in light of the CFPB consent order. The consent order appears to expand the CFPB’s expectations as to what constitutes meaningful involvement. Firms should additionally review their demand letter and staff practices to insure compliance with this latest consent order.