The Consumer Financial Protection Bureau (CFPB) announced this week that a Georgia law firm, and its three principal partners, has agreed to pay $3.1 million to resolve allegations for operating an illegal debt collection lawsuit mill.
The law firm, Frederick J. Hanna & Associates, was accused of operating less like a law firm than a factory in its collection of consumer debt. The Hanna law firm resolved the suit without admitting wrongdoing. The proposed agreement would bar the firm from illegal debt-collection practices such as filing suits without being able to verify the debt is owed, and intimidating consumers with deceptive court filings.
According to the CFPB, the Hanna law firm was charged with violating the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on deceptive practices as well as the Fair Debt Collection Practices Act by:
- Intimidating consumers with deceptive court filings: The CFPB alleged that the firm filed collection suits signed by attorneys when, in fact, there was no meaningful involvement of attorneys. The lawsuits were the result of automated processes and the work of non-attorney staff. The resulting lawsuits misrepresented to consumers that they were “from attorneys.” This process allowed the firm to generate and file hundreds of thousands of lawsuits. One attorney at the firm, for example, signed over 130,000 debt collection lawsuits over a two-year period.
- Introducing faulty or unsubstantiated evidence: The CFPB alleged that the firm used sworn statements from its clients attesting to details about consumer debts to support its lawsuits. The firm filed these statements with the court even though in some cases the signers could not possibly have known the details they were attesting to. In a substantial number of cases, when challenged, the firm dismissed lawsuits. Between 2009 and 2014, the firm dismissed over 40,000 suits in Georgia alone, and the CFPB believes it did so frequently because it could not substantiate its allegations.
The CFPB Director Richard Cordray had issued this statement in regards to the settlement:
“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 Debt collectors that use the court system for purposes of intimidation should reconsider how their practices are harming consumers.”
The CFPB also ordered three of the Hanna law firm’s clients, JPMorgan Chase, Portfolio Recovery Associates, and Encore Capital Group, to overhaul their debt collection practices and to refund millions to harmed consumers.
Below are the links to the lawsuit and consent orders from the CFPB:
The proposed consent order filed today can be found at:http://files.consumerfinance.gov/f/201512_cfpb_proposed-stipulated-final-judgment-and-order-hanna-frederick-j-hanna.pdf
The CFPB’s complaint in the lawsuit can be found at:http://files.consumerfinance.gov/f/201407_cfpb_complaint_hanna.pdf
The proposed consent order filed today follows an earlier court order issued in July 2015, that rejected the defendants’ motion to dismiss the case. Among other things, that court ruling held that attorneys have an obligation to meaningfully review the facts of a lawsuit before filing it and that the CFPB has the authority to take action against attorneys engaged in illegal consumer debt-collection practices.
The court’s July 2015 ruling can be found at:http://files.consumerfinance.gov/f/201512_cfpb_order-frederick-j-hanna.pdf