On April 25, 2016, the Consumer Financial Protection Bureau (CFPB) announced it entered into two settlements, available here and here, with a law firm and a financial services company over allegations the entities filed debt collection lawsuits without properly verifying the underlying debt obligations, in violation of the Consumer Financial Protection Act and the Fair Debt Collection Practices Act. The law firm allegedly specialized in debt collection, filing approximately 500,000 debt collection lawsuits between 2009 and 2014. According to the CFPB, the firm’s attorneys did not review the underlying loan documents and confirm the validity of the outstanding debts before filing lawsuits against debtors. Instead, the attorneys allegedly relied on the firm’s automated computer system and non-attorney support staff to review the documentation. In many cases, the CFPB alleged, the law firm filed collection lawsuits when it had no legal basis for doing so.
The CFPB also settled a similar case against a financial services company specializing in debt buying and collection. The company allegedly hired the law firm to collect debts on its behalf. According to the CFPB, the company failed to provide the law firm with sufficient documentation to verify the debt obligations but still permitted the law firm to pursue collection lawsuits on its behalf.
Under the consent orders, the law firm and the company must pay penalties of $1 million and $1.5 million, respectively, reform their debt verification practices, and stop filing unsubstantiated collections lawsuits.
In the past six months, the CFPB settled two similar actions against debt collection law firms and affiliated companies. CFEW reported on the previous settlements here and here.