The automated lawsuit generator used by the debt buying collection firm and a law firm makes automated dialers seem like going on a walk in the park with an old love interest. The Consumer Financial Protection Bureau (CFPB) had no love for these law firms when it issued a Consent Order, on April 25, 2016, stopping them in their tracks. What is being called a high-volume lawsuit machine, violated the Consumer Financial Protection Act (CFPA), the Fair Debt Collection Practices Act (FDCPA), was not supervised by any lawyers, and it did not produce reliably credible lawsuits. The order was issued to stop the debt buying law firm of Pressler & Pressler, LLP and New Century Financial Services, Inc., who have both engaged in firing off automatic lawsuits at creditors for years, often based on “flimsy or nonexistent evidence.[i]”
Collection efforts and lawsuits filed near the statute of limitations
States have limitations on the time in which they can file a lawsuit to enforce a debt, seeking an enforceable judgment, with which the law firm can go after your bank accounts, assets, income and tax refunds to collect on the judgment amount. We often hear stories about collection agencies making threats of lawsuits, something they cannot do if they are not lawyers. In this case, however, the lawyers were the ones who bought up and tried to collect on debts.
Stated in a recent Time article, “For years, Pressler & Pressler churned out one lawsuit after another to collect debts for New Century that were not verified and might not exist,” said CFPB Director Richard Cordray in a press release. “Debt Collectors that file lawsuits with not regard for their validity break the law and violate the public trust. We will continue to take action to protect borrowers from abuse.[ii]”
Automated lawsuit generators undermining the integrity of the legal system
If a debtor fails to pay by a set due date, a computerized system can automatically populate the name, address and vital data necessary to produce a summons and complaint for the amount the computer believes is owed, and these lawsuits can be printed in bulk, filed online, and otherwise populate the court docket, all without a lawyer reviewing everything to make sure the lawsuit is proper.
The law firm filing automatically generated cases did not ensure an attorney reviewed the petitions before they were filed with courts, rather they used, “untrained support staff, which spent less than 30 seconds a piece in some cases to verify the claims of each lawsuit.[iii]” When activity like this is allowed to occur, where lawyers are not reviewing lawsuits being filed, and a computer makes the judgment call to file the lawsuit, there is a breakdown in the integrity of the legal system because no reasonable person could rely on the authenticity of the documents or proceedings.
The CFPB found violations of the FDCPA and the CFPA
After investigating and reviewing the allegations against and practices of Pressler & Pressler law firm and its debt-buying firm (collectively “respondents”), the CFPB issued a consent order, in agreement with the respondents, setting forth the findings, penalties and the further orders of the CFPB.
The CFPB findings state, “Respondents’ debt-collection litigation activities relied substantially on a non-attorney support staff that far outnumbers the Firm’s attorneys, along with a proprietary collection software system that the Firm uses to automate, review, and ensure compliance with its processes for receiving and preparing new lawsuits for its clients.[iv]”
Finding that the respondents engaged in deceptive practices, the CFPB enjoined and restrained the respondents from continuing certain activities, such as:
- Prohibiting Debt-Collection Litigation Activities Without a Reasonable Basis;
- Prohibiting the Use of Deceptive Affidavits;
- Prohibiting Certain Pre-Judgment Discovery Practices; and
- Additional Conduct Provisions
The CFPB ordered fines to be paid to the bureau in the amount of $1 million for the law firm and $1.5 million for the debt buyer. In addition to the fines, there are significant and ongoing reporting and compliance requirements the respondents must satisfy.
The CFPB and the Zamparo Law Group are advocating for consumers and fighting back against deceptive and abusive collection firms that use tactics like computerized lawsuit generators.
If you believe a bill collector is trying to collect a debt you do not owe, and if you are receiving what seem like improper threats of lawsuits and documents that look like court filings, you might be a victim of a consumer law violation. The Zamparo Law Group can advise you of your rights and whether you have a case and what it may be worth.
The Zamparo Law Group, P.C. is a consumer protection law and litigation firm, representing consumer plaintiffs. Zamparo Law Group in the northwest suburbs of Chicago sues and wins against the companies who refuse to follow the law.
To learn more about consumer protection law and the Zamparo Law Group, please visit the firm’s website. You may also ask for a free case review. The Zamparo Law Group is connected on social media, please follow us and share our resources we share on our Facebook, Twitter and LinkedIn pages. You may call the Zamparo Law Group with any questions by dialing (224) 875-3202.
[i] Time.com, Money, It Just Got Harder for Debt Collection Agencies to Auto-Sue Borrowers, by Ethan Wolff-Mann, Apr. 25, 2016.
[ii] See HNi above.
[iii] See HNi above.
[iv] US CFPB Administrative Proceeding, In the Matter of: Pressler & Pressler, LLP, Sheldon H. Pressler, and Gerarld J. Felt, Apr. 25, 2016.