The Consumer Financial Protection Bureau (CFPB) has entered into its latest consent order targeting consumer debt collection law firms. Once again, the CFPB challenges the lack of “meaningful attorney involvement” it deems required in collection actions.
This latest consent order was entered into by two Oklahoma medical debt collection law firms and their president (“Respondents”). Respondents are required to pay $577,135 to consumers, modify business practices, and pay a $78,800 penalty to the CFPB’s Civil Penalty Fund for conduct the CFPB alleges violated the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA).
The CFPB claims that Respondents violated the FDCPA by the following:
- Communications Misrepresenting Attorney Involvement. The firms allegedly sent demand letters on law firm letterhead which included an attorney’s name and, in some cases, threatened suit. The CFPB claimed that this was misleading because no attorneys had reviewed account documentation or made a professional determination regarding the legitimacy of the debt before the letters were sent. Similarly, collectors allegedly misled consumers during collection calls by stating that they were calling from a law firm. The CFPB claimed that this wrongfully implied that attorneys had participated in the decision to make the calls, even though no attorney had reviewed the account.
- Falsifying Affidavit Notarizations. The firms solicited signed and notarized affidavits from clients for use in the debt collection lawsuits. However, when a client returned an executed affidavit that had not been notarized, the firm allegedly instructed its employees to notarize the affidavits and use them in litigation, without taking proper notarial steps to verify the signature.
Similarly, the Respondents allegedly violated the FCRA by:
- Furnishing Information to a Credit Reporting Agency Without Requisite Policies. The firms allegedly furnished consumer information to a credit reporting company despite lacking written policies or procedures addressing the transmission of that consumer information.
Since late 2015, the CFPB has entered into several consent orders targeting consumer collection law firms and, specifically, the vague and evolving “meaningful attorney involvement” standard. In December 2015, the CFPB entered into a consent order with a Georgia-based law firm based upon allegations that its attorneys were not meaningfully involved in lawsuits. The CFPB alleged that attorneys did not review account level documentation before filing suit. Rather, the firm used an automated and non-attorney staff driven lawsuit process that mass generated suits to where one attorney signed more than 130,000 lawsuit complaints in a two-year period. Based on similar allegations, the CFPB entered into a consent order with a New Jersey-based consumer debt collection law firm in April 2016. The CFPB again challenged the firm’s overreliance on automated software and non-attorney staff in the lawsuit process and found that attorneys often spent less than several minutes reviewing each file before initiating suit.
In addition to the monetary penalties, the latest consent order prohibits Respondents from engaging in specified future conduct unless an attorney has been “meaningfully involved” in reviewing the consumer’s account and has made a professional assessment regarding the debt. This includes restrictions on what law firms may state or imply to consumers in written communications and collection calls, including prohibiting the use of an attorney’s name or the phrase “Attorney at Law” in demand letter signature blocks.
While meaningful attorney involvement remains a nebulous concept, creditors and consumer collection law firms should expect increased scrutiny regarding attorney involvement in collection matters and should continue to ensure that attorney involvement is comprehensive and well documented.