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1.4.8 Collection by Attorneys

When an account is placed with a law firm for collection, the law firm may be provided with limited information about the debt that may not include account-level documentation such as the operative contract, payment history, or collection history.318

Shortly after receiving the electronic data, law firms may use programs to “scrub”319 their newly received files to identify accounts that belong to deceased individuals, those who have filed for bankruptcy, etc.320

While some clients may authorize the law firm to sue immediately after placement, others may require the law firm to make additional collection attempts first.321 Additional collection attempts typically consist of one or more demand letters on law firm letterhead or additional collection calls using the law firm’s name. Relying on non-attorney support staff, some law firms do not require collection attorneys to review account information before these additional dunning letters are mailed or calls are made.322 Such practices may mislead consumers about the extent of attorney involvement in these collection efforts.323

If the law firm does not reach a payment agreement with the consumer as a result of these initial contacts, the next step is typically filing a collection lawsuit. A large portion of debt collection lawsuits end in default judgments324 or in settlements325 with unrepresented consumers326 at the court on the day of their hearing. As a result, a typical collection action is unlikely to be closely scrutinized in many jurisdictions. However, enforcement actions and case law provide examples of variety of abusive practices by collection attorneys that may frequently go undetected, including:

  • • Using non-attorneys to prepare a complaint for filing without meaningful involvement by attorneys to review the pleading;327
  • • Failing to verify claims by debt buyers before filing suit, despite the fact that debt buyers often do not have the necessary documentation to support their claim;328
  • • Altering dates and amounts in declarations from original creditors;329
  • • Using affidavits that the firm knew or should have known to be false;330
  • • Seeking fees or costs that are not legally allowable;331
  • • Filing lawsuits on time barred debts;332
  • • Filing lawsuits in courts hundreds of miles away from the consumers’ homes;333
  • • Proceeding to trial without any witnesses or admissible evidence, relying on court rules to award them judgment if the consumer does not appear, or asking the court to continue or dismiss the case if the consumer does appear;334 and
  • • Misusing garnishment proceedings.335

Footnotes

  • 318 See In re Pressler & Pressler, L.L.P., Consent Order, 2016-CFPB-0009, 5–6 (C.F.P.B. Apr. 25, 2016) (“Most accounts that are placed with Respondents for collection are transmitted through an electronic system using a collection software network such as ‘You Got Claims’ . . . For such electronically transmitted claims, Respondents normally received only either an Excel spreadsheet or a text file containing specific data regarding each account, or claim for a Debt. The data included in these submissions is provided in summary form only and documentation supporting the data was not included.”); Commonwealth v. Lustig, Glaser & Wilson, P.C., Complaint ¶¶22–23 (Mass. Super. Ct. Dec. 21, 2015) (firm filed more than 100,000 collection lawsuits from 2011 through 2015) (“[T]he Lustig Firm regularly downloaded electronic information about alleged consumer debts from Debt Buyers in large batches . . . This information often consisted of little more than a summary electronic data file from the Debt Buyer. This summary data file was typically unaccompanied by meaningful account-level documentation—such as the original contract, monthly statements, a payment history, dispute history, and chain of title documentation—that would be necessary to establish the existence and accuracy of the debt.”); Miller v. Upton, Cohen & Slamowitz, 687 F. Supp. 2d 86, 92–93 (E.D.N.Y. 2009) (creditor granted first law firm access to store’s electronic files on account, but second law firm—where account was transferred to file suit—only had access to consumer’s basic identifying information but not credit card agreement, consumer’s correspondence, payment history, or information about prior collection efforts).

  • 319 See also § 1.5.5, infra (discussing scrubbing).

  • 320 In re Pressler & Pressler, L.L.P., Consent Order, 2016-CFPB-0009, 6 (C.F.P.B. Apr. 25, 2016).

  • 321 Consumer Fin. Protection Bur., Consumer Credit Card Market Report 253 (Dec. 2015).

  • 322 See Consumer Fin. Protection Bur. v. Weltman, Weinberg, & Reis Co., L.P.A., Complaint, 17-cv-817, ¶¶ 23–24 (N.D. Ohio Apr. 17, 2017); Commonwealth v. Lustig, Glaser & Wilson, P.C., Complaint ¶ 26 (Mass. Super. Ct. Dec. 21, 2015).

  • 323 See § 7.6.2, infra.

  • 324 See § 1.4.9.3, infra.

  • 325 See § 1.4.9.4, infra.

  • 326 See § 1.4.9.4, infra.

  • 327 See, e.g., In re Pressler & Pressler, L.L.P., Consent Order, 2016-CFPB-0009, 7 (C.F.P.B. Apr. 25, 2016) (“The signing attorney generally spent less than a few minutes, sometimes less than 30 seconds, reviewing each summons and complaint before approving the filings and directing that a lawsuit be initiated”); Consumer Fin. Protection Bur. v. Frederick J. Hanna & Assoc., Complaint, 14-cv-2211, ¶14 (N.D. Ga. July 14, 2014) (“The Firm’s attorneys gave only cursory review to those suits, checking the pleadings prepared by non-attorney support staff for grammar and spelling errors. The Firm’s attorneys were expected to spend no more than one minute reviewing and signing the pleadings prepared by support staff.”); Bock v. Pressler & Pressler, 30 F. Supp. 3d 283 (D.N.J. 2014) (collection cases were prepared for lawsuit by non-attorneys who prepared a pre-drafted complaint for attorney review; only attorney involvement in filing of the case was four-second “review” before complaint was forwarded for filing). See also § 5.5.6.2, infra (discussing meaningful involvement by attorneys).

  • 328 See, e.g., In re Pressler & Pressler, L.L.P., Consent Order, 2016-CFPB-0009, 7 (C.F.P.B. Apr. 25, 2016); Commonwealth v. Lustig, Glaser & Wilson, P.C., Complaint ¶¶55–63 (Mass. Super. Ct. Dec. 21, 2015); Bock v. Pressler & Pressler, L.L.P., 30 F. Supp. 3d 283, 290 (D.N.J. 2014) (finding a violation of § 1692e where “neither [reviewing attorney] nor any other member of Pressler’s staff reviewed, or otherwise had knowledge of, the contract between Bock and the bank, including any choice of law, choice of venue, or dispute resolution clause governing disputes between Bock and his creditor . . . Nor did [reviewing attorney] or anyone else at Pressler review the agreement by which Bock’s original creditor allegedly assigned this debt to Pressler’s client, Midland.”); Consumer Fin. Protection Bur. v. Frederick J. Hanna & Assoc., Complaint, 14-cv-2211, ¶24 (N.D. Ga. July 14, 2014).

  • 329 See In re Faloni & Assoc., Consent Order, 2016-CFPB-0006 (C.F.P.B. Feb. 23, 2016).

  • 330 See Consumer Fin. Protection Bur. v. Frederick J. Hanna & Assoc., Complaint, 14-cv-2211, ¶23 (N.D. Ga. July 14, 2014).

  • 331 See, e.g., Kaymark v. Bank of Am., 783 F.3d 168 (3d Cir. 2015) (listing fees not yet incurred in foreclosure complaint stated a claim against law firm under FDCPA); McDermott v. Marcus, Errico, Emmer & Brooks, P.C., 911 F. Supp. 2d 1, 60 (D. Mass. 2012) (law firm violated FDCPA by overstating amount of attorney fees owed in collection letter). See also §§ 7.4, 8.4, infra.

  • 332 See, e.g., Commonwealth v. Lustig, Glaser & Wilson, P.C., Complaint ¶¶73–80 (Mass. Super. Ct. Dec. 21, 2015); McCollough v. Johnson, Rodenburg & Lauinger, L.L.C., 637 F.3d 939 (9th Cir. 2011) (lawyers filed lawsuit against consumer despite evidence that debt was beyond statute of limitations). See also § 7.2.12.3, infra.

  • 333 See, e.g., Harold v. Steel, 773 F.3d 884, 886 (7th Cir. 2014) (“If a debt collector violates [15 U.S.C. § 1692i], it inflicts an injury measured by the costs of travelling or sending a lawyer to the remote court and moving for a change of venue, no matter how the suit comes out.”); S. Rep. No. 95-382, at 5 (1977), 1977 U.S.C.C.A.N. 1695, 1969 (“This legislation also addresses the problem of ‘forum abuse,’ an unfair practice in which debt collectors file suit against consumers in courts which are so distant or inconvenient that consumers are unable to appear. As a result, the debt collector obtains a default judgment and the consumer is denied his day in court.”). See also § 10.3, infra.

  • 334 See Demarais v. Gurstel Chargo, P.A., 869 F.3d 685 (8th Cir. 2017).

  • 335 See, e.g., Waitkus v. Pressler & Pressler, L.L.P., 2012 WL 686025 (D.N.J. Mar. 2, 2012) (allegations that collection attorneys obtained 100% of consumer’s earnings, violating state procedures to execute on wages and federal and state exemptions of 75% and 90% of earnings, stated claim for violation of § 1692f); Bray v. Cadle Co., 2010 WL 4053794 (S.D. Tex. Oct. 14, 2010) (plaintiff stated claim that defendants engaged in “unfair or unconscionable means to collect” the debt by alleging that: “1) his bank account was exempt by law from garnishment by the Social Security Act; and 2) the defendants garnished the bank account, despite knowing or having reason to know that it contained Social Security funds and despite having failed to conduct pre-garnishment discovery”). See also § 1.4.11, infra (discussing post-judgment remedies).