Consumer Law

Law firm operates 'more like a factory' in filing hundreds of thousands of debt suits, CFPB alleges

A Georgia-based law firm uses automation and support staff to sue hundreds of thousands of consumers to collect debts for credit card companies and debt buyers, the Consumer Financial Protection Bureau alleges in a lawsuit.

In some cases, the consumers don’t owe any money, or they owe money in lower amounts than claimed, according to the suit (PDF) filed on Monday against Frederick J. Hanna & Associates and its three principal partners.

“To produce so many lawsuits, the firm operates less like a law firm than a factory,” the CFPB claims in the suit. “It relies on an automated system and nonattorney support staff to determine which consumers to sue. The nonattorney support staff produce the lawsuits and place them into mail buckets, which are then delivered to attorneys essentially waiting at the end of an assembly line. The firm’s attorneys are expected to spend less than a minute reviewing and approving each suit.”

The CFPB says the debt-collection suits are signed with the names of lawyers at Frederick J. Hanna & Associates, though they have no meaningful involvement in the process, and the collection efforts are often based on faulty or inadequate documentation.

The suit seeks an injunction barring violations of the Fair Debt Collection Practices Act and the Consumer Financial Protection Act, a civil fine, and restitution for victims, according to a CFPB press release. The Washington Post’s Wonkblog has a story.

Frederick J. Hanna & Associates has offices in Atlanta, Fort Lauderdale and St. Louis, according to its website. Twenty lawyers are listed on the website, most of them in Georgia. The suit says that, typically, the firm employed hundreds of nonlawyer staffers but only eight to 16 lawyers.

The firm collects debts on behalf of credit card issuers and debt buyers. In Georgia alone, the suit says, the firm filed more than 350,000 debt-collection suits from 2009 through 2013. One lawyer signed an average of about 1,300 collection suits a week, according to the suit.

The debt buyers were often unable to supply basic documents such as contracts underlying the alleged debts or chain of title showing standing to sue by the debt buyers, the suit claims. The firm relied on affidavits supporting the suits that it knew or should have known were false, according to the suit.

Most of the debt-collection suits resulted in a default judgment or settlement, but the firm often backed down when consumers responded, the CFPB says. Since 2009, lawyers voluntarily dismissed more than 40,000 of the Georgia collection suits, a rate of more than 155 a week, according to the CFPB suit.

The law firm’s managing partner, Joseph Cooling, told the Washington Post in an email that “we strongly deny the allegations of the complaint and, moreover, the overall mischaracterization of our law firm.”

Cooling told the Post that Frederick J. Hanna & Associates has cooperated with the CFPB and it is disappointed by the lawsuit He said the firm takes great pride in its commitment to complying with consumer protection laws, and it looks forward to presenting its case in court.

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