CFPB Files Suit Against Law Firm for Collection Activities

CFPB Files Suit Against Law Firm for Collection Activities

From - http://www.acainternational.org/cfpbarticle-c ... .aspx?rssfeed=1

Consumer Financial Protection Bureau alleges that Georgia company relies on deceptive court filings and faulty evidence to churn out lawsuits.

The Consumer Financial Protection Bureau filed a lawsuit on July 14, 2014, in a federal district court against a Georgia-based firm, Frederick J. Hanna & Associates, and its three principal partners for operating an alleged “debt collection lawsuit mill that uses illegal tactics to intimidate consumers into paying debts they may not owe.”

The bureau alleges that the firm churns out hundreds of thousands of lawsuits that frequently rely on deceptive court filings and faulty or unsubstantiated evidence. The CFPB is seeking compensation for victims, a civil fine and an injunction against the company and its partners.

“The Hanna firm relies on deception and faulty evidence to drag consumers to court and collect millions,” said CFPB Director Richard Cordray. “We believe they are taking advantage of consumers’ lack of legal expertise to intimidate them into paying debts they may not even owe. Today we are taking action to put a stop to these illegal debt collection practices.”

Frederick J. Hanna & Associates issued a statement denying the allegations in response to the CFPB’s announcement.

The CFPB alleges that the firm operates like a factory, producing hundreds of thousands of debt collection lawsuits against consumers on behalf of its clients, which mainly include banks, debt buyers and major credit card issuers. Between 2009 and 2013 the firm, filed more than 350,000 debt collection lawsuits in Georgia alone, according to the bureau. The CFPB further alleges the defendants collected millions of dollars each year through these lawsuits, often from consumers who may not actually have owed the debts.

The CFPB alleges that the defendants violated the Fair Debt Collection Practices Act. Among other things, the FDCPA prohibits making misrepresentations to consumers, and specifically prohibits misrepresenting to a consumer that a communication is from an attorney.

The CFPB also alleges that the defendants violated the Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibits deceptive acts or practices in the consumer financial marketplace.

Violations alleged in the CFPB’s complaint include intimidating consumers with deceptive court filings and introducing faulty or unsubstantiated evidence.

Through this lawsuit, the bureau seeks to stop the alleged unlawful practices of the firm and its three principal partners. The bureau has also requested that the court impose penalties on the company and its partners for their conduct and require that compensation be paid to consumers who have been harmed.

A link to the CFPB complaint may be found here http://files.consumerfinance.gov/f/201407_cfpb_complaint_hanna.pdf

Good news!

I hope that action reduces the number of fraudulent collection claims by ANY company; and imposes a hefty penalty on the named company, if they are found guilty.  I would imagine, however, the filings and counterfilings will go on for years, before the case is adjudicated.  Then, part of the penalty might be waived, because the company might be found to be insolvent.

Wow, things are surely heating up in Atlanta aren't they?  This is the second action by the feds this month on "firms" in that area.

Good news! How bout this client list: JP Morgan Chase, Bank of America, Capital One, and Discover, and debt buyers such as Portfolio Recovery Associates and Midland Funding LLC, for starters?

Yahooo!!!!  Thanks for posting.

What's interesting is that the defendants routinely dismissed cases where the debtor showed up in court or were represented by legal council:  

"21.    In most of the Georgia Collection Suits, consumers either failed to appear, which resulted in a default judgment, or agreed to settle.
22.    When consumers responded to the Georgia Collection Suits, the Firm’s attorneys routinely dismissed the cases. Indeed, since 2009, the Firm’s attorneys have voluntarily dismissed more than 40,000 of the Georgia Collection Suits after they had already been served—a rate of more than 155 a week. Consumers who retained attorneys were almost four times more likely to have their cases dismissed."

This pretty much proves the defendants knowingly and intentionally ran nothing more than a "default judgment mill" and the rate of dismissal  proves on its face they knew they couldn't support their claims in court, if called to produce evidence and prove by a preponderance of the  evidence that their claims were valid.   This violates an important canon of legal ethics, that an attorney acts unethically when he brings suit in a matter he does not believe has merit.   This is especially egregious if documents were being sworn, signed and submitted to the court to that effect, that the attorney bringing suit had actual knowledge of the facts when in truth he was simply rubber-stamping documents prepared by others with no knowledge as to the facts or merits whatsoever.  This borders on perjury--in fact it probably crosses the line.

Another interesting issue that wasn't addressed is the matter of legal service.    Judging by the number of suits generated, in the tens of thousands, I'd love to know how many off those debtor/defendants  didn't show up in court because they had no idea they were being sued.   Any firm whose only hope of winning is to rely on the defendant not showing up exposes an obvious self-interest in assuring the absolute minimum, if that, is done to notify the defendant of the pending suit.  

Hope the CFPB hand them their [***].

Someone should be pushing to have any of this "firm"'s Attorneys that were involved in this to be disbarred by the applicable Bar Associations. And to have anyone posing as Attorneys charged with practicing law without a license.

>>> Someone should be pushing to have any of this "firm"'s Attorneys that were involved in this to be disbarred by the applicable Bar Associations. And to have anyone posing as Attorneys charged with practicing law without a license. <<<

That may well happen automatically.  Attorneys are typically obligated to report certain types of behavior on the part of other attorneys to the other attorneys' bar associations, and courts can do it on their own.  And if someone is registered in more than one state bar, they communicate their disciplinary actions to one another.  And if they try to move their practice to another state bar, the background check done by the other state bar would find the discipline meted out by the original state bar.  In the latter case, not only would they not be allowed to practice, but if they didn't indicate that they were disciplined by the original state bar, their lack of candor would be reported back to the original state bar and the discipline that was applied would be bumped to an even higher level.

If there is actual fraud involved here by actual attorneys, you can bet on the fact that they WILL be disciplined.

Fred Hanna is by no means alone in plying a nearly automated trade through the courts. He just happens to run a very high volume conveyor belt. We almost can't stress enough that most if not all creditor litigation, in particular for junk debt, depends heavily on the *lack of resistance*. The Hannas of the world need defendants who fail to defend.

We should also not miss parallels to "robo-perjury" cases against mortgage lenders, Minnesota AG Lori Swanson's 2011 action against Midland Funding, Linda Almonte's heroic exposure of JPMorgan's messy records, and the more recent busting of United Credit Recovery for its almost laughable fraud upon the courts.

Sewer service was not part of the CFPB complaint, but may have been part of the Hanna playbook. Here I excerpt a local TV segment from December 2010:

"One was a case where a lawsuit was filed and the alleged debtor was summonsed to court under an old address in Powder Springs. .... the person never even knew they were being sued. .... Another page in the same file showed one of Hanna's own partners signed an affidavit, swearing under oath that the person was notified at a completely different address ..."

Tough Questions For Law Firm Owner After Complaints
State Officials Say They Use Intimidation Tactics To Collect Debt
http://www.cbsatlanta.com/news/26052166/detail.html

The GA Bar is ahead of you by a few months, as reported three weeks ago.

GA State Bar investigating controversial debt-collecting attorney
http://www.cbs46.com/story/25861009/ga-state- ... 6-investigation

The trigger was a case where Hanna arrogantly sought post-judgment interest from a debtor who had clearly paid on time and in full, but the funds were trapped in a court system limbo.

If the bar does its job, Hanna will be slashed in a tender spot. Four years and change ago he walked away grinning from a state Office of Consumer Affairs probe on a variant of the old "I'm not a collector, I'm a lawyer" defense, which the GA Supreme Court supported, saying the OCA violated separation of powers.

Curiously, the state trod the same ground as the CFPB in trying to drag Hanna under state business regulation:

    "In an appeal to the Supreme Court, lawyers from the state Department of Law argued that Hanna’s firm is much more of a business that can be regulated by the state government than a law firm that cannot.

“Although Mr. Hanna refers to his corporation as a ‘law firm,’ its organization bears no resemblance to that of a traditional law firm,” state lawyers argued, noting that the firm employs about 450 people, of which only 10 are attorneys."

Governor’s Office of Consumer Affairs appeals Cobb judge’s ruling that says probe violates separation of powers
http://www.atlantatrial.com/frederick-j-hanna-daniel-dewoskin/

>>>The GA Bar is ahead of you by a few months, as reported three weeks ago.
GA State Bar investigating controversial debt-collecting attorney <<<

And here's a follow-up by the same TV station on the CFPB complaint:

http://www.cbs46.com/story/26026163/us-consum ... ks-compensation

By the way, the story that you cite says, "CBS46 News has learned consumers have filed 556 complaints against Hanna with the Governor's Office of Consumer Protection since 2009." It also says that another attorney filed a complaint in 2010. I can understand an investigation into an attorney's ethics by a state bar taking several months or even a year, but it really seems that someone dropped the ball here.

The federal complaint alleges a truly massive scheme.  If it turns out to be true, I think the Georgia State Bar might be in line for some bad publicity for taking as long as it has to investigate these lawyers' practices.

Here's more.  Even though the federal complaint only mentions the (so-called?) law firm's practices in Georgia, they also have offices in Missouri and Florida, according to this report (which may go behind a pay wall after a while):

http://www.stltoday.com/business/local/u-s-co ... b837cdc700.html

"...offices in Marietta, Ga.; Plantation, Fla., and Earth City, Mo. ..." (Earth City is near St. Louis)

One of the attorneys on the complaint is Robert A. Winter, who does, indeed, have an active license to practice law in Missouri.  From the Missouri Bar membership directory, accessed on-line today:

Search Results

return to Official Directory Search

Winter, Robert Adam
Bar Number: 60304
Date Admitted: 2/11/2008
Marietta, GA 30067-8764

Current Standing: Good Standing, Active

Robert A. Winter is also a member in good standing of the Florida Bar, as of today:
Robert Adam Winter
Member in Good Standing Eligible to Practice Law in Florida
Bar Number:
769540
Address:
Frederickj Hanna & Associates PC
2253 Northwest Pkwy SE
Marietta, GA 30067-8764
United States

I just saw this news on a local TV station. The reporter was standing in front of Hanna's office--and the parking lot was completely empty.

Good. Let's see him weasel himself out of this one.

A  follow-up: It seems that Hanna's parking lot was empty due to him giving his employees a day off "to go bowling". I'm not kidding. Though the reporter covering the story did not say so, I would be willing to bet that Hanna simply did not want the TV exposure in light of this latest lawsuit.

He is so slick, slimy and oily that it defies comprehension.

Apparently Hanna was forewarned of the news team coming.   Either the news guys are pretty sloppy ("we'll come by tomorrow") or Hanna is even slipperier than people thought.