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CFPB settles FDCPA claims against debt collection law firms

Posted in CFPB Enforcement, Debt Collection

The CFPB announced that it has entered into a consent order with two law firms specializing in the collection of medical debts and their president for alleged FDCPA violations.  The consent order also settles allegations that the respondents violated Regulation V (which implements the Fair Credit Reporting Act).  The consent order requires the respondents to pay $577,135.20 in consumer redress and a $78,800 civil money penalty to the CFPB.

According to the consent order (whose findings of fact and conclusions of law are neither admitted nor denied by the respondents), the respondents violated the FDCPA by engaging in the following conduct:

  • Sending collection letters on formal law firm letterhead containing a signature block with the computerized signature of an individual attorney, underneath which the words “Attorney at Law” were printed, and making collection calls in which the non-attorneys making the calls identified themselves as calling from a law firm.  According to the CFPB, these letters and calls constituted deceptive acts or practices in violation of the FDCPA because the respondents thereby “represented, directly or indirectly, expressly or impliedly” that the collection letters were from an attorney or that an attorney was  meaningfully involved in reviewing the consumer’s case or had made a professional judgment that sending a collection letter or making a collection call was warranted.
  • Having affidavits signed by clients notarized by law firm employees who did not take any steps to verify the truth of the signatures and filed the affidavits in collection lawsuits.  According to the CFPB, the filing of the affidavits constituted deceptive acts or practices in violation of the FDCPA because the respondents thereby “represented, directly or indirectly, expressly or by implication” that the affidavits were verified and notarized in accordance to Oklahoma law which requires notaries to take steps to verify that a signature is true.
  • Failing to maintain any policies or procedures regarding the accuracy and integrity of the information the respondents furnished to consumer reporting agencies as required by Regulation V.

The consumers to receive redress under the consent order are those who made a payment within 90 days of receiving a demand letter from the respondents during a specified period that threatened litigation.  In addition to paying consumer redress and a civil money penalty, the consent order prohibits the respondents from continuing to engage in the alleged unlawful conduct that was the subject of the enforcement action and requires them to disclose certain information in all written and oral collection communications where an attorney “has not been meaningfully involved” in reviewing the consumer’s account and “has not made a professional assessment” of the debt.  For example, all such communications must include a clear and prominent disclosure that no attorney has reviewed the account at issue and demand letters must omit the name of any attorney and the phrase “Attorney at Law” from the signature block.

The order also prohibits the respondents from referring to the potential filing of a collection lawsuit or commencing a collection lawsuit unless an attorney has reviewed specified account-level information, made a professional assessment of the delinquency, and obtained client permission to file the lawsuit.  In addition, the respondents must include a statement in all demand letters and collection phone calls regarding the consumer’s right to request such account-level documentation and revise and enhance their written policies and procedures regarding the accuracy and integrity of information furnished to consumer reporting agencies.

In April 2016, the CFPB announced that it had entered into a consent order with a debt collection law firm and two of its partners to settle allegations that the firm’s litigation practices violated the FDCPA.