Days later on Dec. 28, CFPB filed a proposed settlement in federal court that once approved, will stop a Georgia-based law firm and its principals from flooding courts with lawsuits that were as faulty as they were prevalent in harming consumers. Some consumer advocates believe that this first-of-its-kind suit and settlement together set a significant precedent.
This second enforcement action culminated a July 2014 lawsuit brought by CFPB against a Georgia-based law firm, Frederick J. Hanna and Associates, for operating an illegal debt collection lawsuit mill. Specifically, CFPB charged the firm with two major violations:
1. Intimidating consumers with deceptive court filings that enabled the firm to churn out hundreds of thousands of lawsuits over a four-year period from 2009 to 2014; and
2. Introducing faulty or unsubstantiated evidence to support its lawsuits, resulting in the collection of millions of dollars each year—often from consumers who may not have owed debts.
“The Hanna firm relied on deception and faulty evidence to coerce consumers into paying debts that often could not be verified or may not be owed,” said CFPB Director Richard Cordray. “Debt collectors that use the court system for purposes of intimidation should reconsider how their practices are harming consumers.”
With court approval, Hanna and Associates and its principals will:
•Pay a $3.1 million penalty;
•End illegal collection and intimidation tactics;
•Be banned from filing or threatening lawsuits without substantial and specific documentation on the affected consumer’s debt; and
•Stop the use of deceptive court documents to support its cases.
In addition, three of the law firm’s clients—JP Morgan Chase, Portfolio Recovery Associates and Encore Capital Group must also revamp their debt collection practices and then refund millions to harmed consumers. These actions stem from separate collection cases.
“People struggling to pay their bills should not also fear harassment, humiliation or negative employment consequences because of debt collectors,” concluded Cordray. “Borrowers should be treated with common decency. . . .[W]e will not tolerate illegal debt collection practices.”
Here’s hoping that more deceptive and illegal lending practices are brought to an end in 2016.
(Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.)
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