CFPB SUES DEBT COLLECTION LAW FIRM

The Consumer Financial Protection Bureau (CFPB) recently sued Georgia-based Frederick J. Hanna & Associates (“Hanna & Associates”) in one of the first lawsuits of its kind. The CFPB’s case, filed in Georgia federal court, accuses Hanna & Associates of churning out more than 350,000 credit card collection complaints between 2009 and 2013 against consumers in Georgia, some of whom owed nothing or owed less than what was claimed. The CFPB’s action has been criticized by some lawyers as an intrusion of the federal government into the practice of law, an area that has previously only been regulated by the individual states.

In the case the CFPB accuses Hanna & Associates and its three principal partners of violating the Fair Debt Collection Practices Act (“FDCPA”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibits deceptive acts or practices in the consumer financial marketplace. At primary issue, according to the CFPB, is the use of non-attorney staff and automated processes to prepare the debt collection lawsuits for filing. It is alleged that lawyers at the firm spent, on average, less than one minute reviewing each file before suit.

This isn’t the first time Hanna & Associates has faced a government lawsuit, however. In 2010, the Georgia Supreme Court in a 4-3 ruling, held in favor of Hanna and Associates in a lawsuit brought by the state’s regulatory agency, the Office of Consumer Affairs (“OCA”), stemming from allegations that the firm was sending collection letters that appeared to be from a lawyer without meaningful review by an attorney. While the Georgia Supreme Court held that the OCA’s action “constitute[d] an impermissible interference” into the practice of law, the Court noted that investigating violations of the law involving attorneys does not automatically amount to regulating the practice of law itself.

While some may view the CFPB’s lawsuit as an unlawful intrusion into the practice of law, the CFPB maintains that law firms who primarily engage in collection work are debt collectors and not strictly legal advisors, and therefore subject to suit by the CFPB. Accordingly, the lawsuit against Hanna & Associates likely signals the CFPB’s intent to target similar high-volume collection law firms in the future.

For more information regarding the lawsuit and how it may affect you or your business, contact Joseph Messer at (312) 334-3440 or at jmesser@messerstrickler.com.