By Richard Roth
The Consumer Financial Protection Bureau has reached a settlement of a suit claiming that Frederick J. Hanna & Associates, a Georgia-based law firm, and its three principal partners operated an illegal debt collection lawsuit mill. The suit, filed in July 2014, alleged that the firm violated the Fair Debt Collection Practices Act and engaged in deceptive or abusive acts or practices in violation of the Dodd-Frank Act. The bureau claimed that the firm, its principal owner, and the managing partners operate “like a factory” in processing debt collection suits for its clients, which the bureau says are principally banks, credit card issuers, and debt buyers.
The proposed consent order follows a July 15, 2015, decision rejecting the argument that the bureau was attempting to illegally regulate the practice of law and violating the firm’s constitutional rights.
If approved by the court, the consent order would:
- prohibit the law firm and principal partners from suing or threatening to sue to enforce debts unless they have specific documents and information showing the debt is accurate and enforceable;
- require the firm to create a recordkeeping system documenting that it and the partners reviewed specific documentation related to a consumer’s debt before suing or threatening collection suits;
- prohibit the firm and its partners from using affidavits as evidence to collect debts unless the statements specifically and accurately describe the signer’s knowledge of the facts and the attached documents; and
- require the firm and principal partners jointly to pay a $3.1 million penalty to the CFPB’s Civil Penalty Fund.
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