Consumer Finance Insights
December 29, 2015

CFPB Settles With Law Firm Over Alleged Abusive Debt Collection Practices

On December 28, 2015, the Consumer Financial Protection Bureau (CFPB) announced that it entered into a consent order​ with a Georgia-based law firm over allegations that the law firm used improper and abusive debt collection tactics in violation of the Fair Debt Collection Practices Act (FDCPA) and the Consumer Financial Protection Act (CFPA).  The law firm collected c​redit-card debt on behalf of national financial institutions and large debt buyers.  The CFPB alleged that the law firm’s debt collection practice “operates less like a law firm than a factory.”  Between 2009 and 2013, the law firm allegedly filed more than 350,000 collection lawsuits in one state, and one attorney allegedly signed approximately 1,300 complaints per week.​  According to the CFPB, non-attorney support staff reviewed debtors’ files and determined which files merited legal action.  Support staff then drafted complaints, which firm attorneys spent less than a minute reviewing before filing the lawsuits.  Support staff, utilizing the firm’s automated software system, also allegedly determined whether the consumer had filed for bankruptcy, whether the statute of limitations had run, and the date the debtor last made a payment.  Once filed, the law firm frequently dismissed suits in which debtors responded or hired an attorney.  The CFPB also alleged that the law firm submitted sworn affidavits in judicial proceedings, by persons who did not have actual knowledge of the facts contained in the affidavits, that purportedly demonstrated the validity and ownership of the debts.

The CFPB consent order, entered in the U.S. District Court for the Northern District of Georgia, follows the court’s July 2015 order denying the law firm’s motion to dismiss the complaint.​  Under the terms of the consent order, the law firm must pay a $3.1 million civil penalty and reform its debt collection practices, including its factual investigation and affidavit practices.