CFPB files lawsuit against debt collection law firm

CFPB files lawsuit against debt collection law firmOn April 17, 2017, the CFPB announced that it had filed a lawsuit in federal district court against a debt collection law firm for allegedly misrepresenting the level of attorney involvement in demand letters and phone calls placed to consumers.

According to the Bureau, the law firm Weltman, Weinberg & Reis (WWR) falsely represented in “millions of collection letters sent to consumers that attorneys were involved in collecting the debt.” The law firm also allegedly made statements on collections calls that created a false impression that attorneys had meaningfully reviewed the consumer’s file, when no such review had occurred. In fact, the Bureau alleges that in many cases “no attorney had reviewed any aspect of a consumer’s individual debt or accounts.”

WWR is a Cleveland-based law firm that regularly collects debts related to credit cards, installment loan contracts, mortgage loans, and student loans. The firm collects on debts nationwide but only files collection lawsuits in seven states: Illinois, Indiana, Kentucky, Michigan, New Jersey, Ohio, and Pennsylvania.

The Bureau alleges in its complaint that WWR engaged in unlawful debt collection practices in violation of the Fair Debt Collection Practices Act (FDCPA) and the Consumer Financial Protection Act (CFPA).

Specifically, the CFPB alleged that WWR sent letters on formal law firm letterhead with the phrase “ATTORNEYS AT LAW” at the top of the letter. Some letters indicated that the firm may take “legal action” against consumers who did not make payments. Despite such representations, in most cases, no attorneys had reviewed consumer-specific information or determined that the consumer actually owed the debt, or that the account was a candidate for litigation before mailing such letters. In addition, none of the demand letters included any disclaimer notifying consumers that an attorney had not reviewed the consumer’s file or determined that the consumer owed the amount demanded.

The CFPB also alleged that WWR’s debt collections placed collection calls that implied that attorneys were meaningfully involved in the assessment of an alleged debt’s validity and that a determination was made that such calls were warranted.

The Bureau asked the court to issue an injunction permanently prohibiting WWR from committing future violations of the FDCPA and the CFPA, to impose civil money penalties on WWR for its conduct, and to require WWR to refund and compensate consumers who have been harmed.

WWR, on the other hand, maintains that the Bureau’s lawsuit is based upon “its interpretation of the law, and not on any actual violation of federal or state laws or regulations as they are written today.” Managing Partner Scott Weltman issued a statement explaining the WWR “fundamentally disagree[s] with the CFPB’s allegations” and claimed that the lawsuit is “the result of our firm’s refusal to be strong-armed into a Consent Order.” Weltman also pointed out that the CFPB has conduct a two-and-a-half year investigation into the law firm and “did not uncover a single instance of consumer harm.”

This is not the first instance where a law firm has claimed that they did not violate state or federal law and that the CFPB is making rules through enforcement activity. In April 2016, the CFPB announced the filing of a consent order with New Jersey debt collection law firm, Pressler & Pressler LLP. The firm expressed similar frustration with the Bureau’s interpretation and application of the law. A copy of that press release is available here.

Tags: CFPB, CFPB Enforcement, Debt Collection

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