ICFE eNEWS #16-13 - May 20th 2016
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CFPB Monitor - CFPB announces consent orders with debt collection law firm, two law firm partners, debt buyer

by Barbara S. Mishkin

The CFPB announced that it has entered into two consent orders involving debt collection litigation practices. A debt collection law firm and two of its partners are the subject of one consent order and a debt buyer is the subject of the other consent order. The consent orders recite that the conduct of the law firm, named partners and debt buyer violated the FDCPA prohibition against using false or misleading representations in connection with the collection of a debt and also constituted deceptive and unfair acts or practices in violation of the CFPA. In addition to imposing new requirements for future collection activities, the consent orders require the law firm and named partners to pay a total civil money penalty of $1 million and the debt buyer to pay a civil money penalty of $1.5 million.

According to the consent order with the law firm and named partners, the law firm specialized in debt collection and the named partners each had "managerial responsibility for the Firm and materially participated in the conduct of its debt-collection litigation practices." The consent order states that:
The consent order with the debt buyer states that collection complaints filed on the debt buyer's behalf by the law firms it retained (which included the law firm that is the subject of the other consent order) were signed by attorneys who had not reviewed Original Account-Level Documentation prior to filing the lawsuits or preparing pleadings. It also states that the debt buyer did not "in all cases" provide its law firms with "account-level documents" before filing suit or require its law firms to review such documents before filing suit. In addition, before filing suit, the debt buyer "did not always" provide a law firm "with the documents evidencing the full chain of title showing that [the debt buyer] actually owned the debt and thus had standing to sue the consumer." The consent order with the debt buyer includes statements similar to those in the other consent order regarding the law firms' failure to independently investigate or verify support for the lawsuits in instances where they had information that the facts alleged were unsupported.

In addition to requiring payment of civil money penalties, the terms of the consent orders include the following: We note that the prohibition on pre-judgment litigation discovery does not appear to have been included in prior CFPB consent orders and represents an extension of the CFPB's authority to restrict practices that should be left to the procedural rules of the court in question.

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Sent by:

Paul S. Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE)

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