In July, the Consumer Financial Protection Bureau (CFPB) filed a federal lawsuit against Frederick J. Hanna & Associates, alleging the Georgia law firm filed tens of thousands of debt collection lawsuits against individuals without attorney review or investigation. The CFPB suspected foul play when it was noted that the same name appeared on 130,000 debt collection lawsuits over a two-year period.
The CFPB complains that Frederick J. Hanna & Associates used an automated process to produce debt collection lawsuits without any meaningful involvement of lawyers, which misrepresents itself to consumers in violation of the law. The law firm is also accused of intimidating consumers into paying debts they may not even owe, and producing sworn statements from people who couldn’t possibly know the details of the consumer debts. The CFPB points out that when challenged in court, the firm dismissed more than 40,000 lawsuits it had filed in Georgia alone because it couldn’t substantiate claims. Since 2009, the law firm has made millions collecting debts for creditors such as Bank of America and Capital One. The CFPB seeks compensation for victims, a civil fine, and an injunction against the firm and its partners.
In response to the federal complaint, Frederick J. Hanna & Associates recently filed a motion to dismiss, claiming that the firm is shielded by a “Practice of Law Exclusion” explicitly included in the federal law. Additionally, the firm points out that there is no standard under federal law requiring “meaningful attorney involvement” when filing a debt collection lawsuit, and that the CFPB has not identified any instance in which the firm filed an affidavit without personal knowledge. Finally, taking a page from consumer attorneys, the firm argues that the federal law is subject to a one-year statute of limitations, so claims against the law firm that date back to 2009 should be barred.
This is an important case in the brief history of the CFPB. Creditor lawsuit mills have been around for many years and prey on the poor and often innocent, wrongfully damaging credit and extorting money from consumers for unenforceable debts. If successful, the CFPB may cause real change in the third party debt collection industry and provide greater protections for individuals from debt collection abuse.