CFPB Files Claim against Debt Collection Lawsuit Mill

Washington, DCWith consumers and officials fighting back against debt collector harassment, it's no wonder that there seems to be news every day about another debt collector lawsuit. Many lawsuits allege bill collector harassment of consumers, including calling at unreasonable hours and making repeated phone calls. A new lawsuit filed by the Consumer Financial Protection Bureau (CFPB) alleges that one debt collection firm actually acts as a debt collection lawsuit mill.

According to a news release from CFPB, a Georgia-based debt collection firm, Frederick J. Hanna & Associates, was in fact a debt collection lawsuit mill. The CFBP alleges the firm and its three principal partners used “illegal tactics to intimidate consumers into paying debts they may not owe.”

The Bureau alleges that the firm churned out hundreds of thousands of lawsuits and used deceptive court filings and faulty evidence to obtain judgments in its favor.

“To produce so many lawsuits, the Firm operates less like a law firm than a factory,” court documents state. “It relies on an automated system and non-attorney support staff to determine which consumers to sue. The non-attorney support staff produces the lawsuits and places 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.”

In its lawsuit, the CFPB alleges that Hanna & Associates collected millions of dollars each year, but those collections may have come from consumers who either did not owe the debts or did not owe the amounts claimed. Among the companies that Hanna & Associates collected debts for, according to the lawsuit, were JP Morgan Chase, Bank of America and Capital One.

To make its money, the firm allegedly filed more than 350,000 collection suits in a four-year period from 2009 to 2013. One attorney reportedly signed an average of 1,300 collection lawsuits a week over a two-year period. In some cases, the debt collection lawsuits were dismissed, but the CFPB argues that consumers who retained an attorney to help them were approximately four times more likely to have their cases dismissed than those who did not seek attorney help.

In some cases, according to the lawsuit, the debt buyers did not even have the original contracts for the alleged debts or a chain of title showing that there were grounds for a lawsuit.

Among the allegations made by the CFPB are that the firm misrepresented that the lawsuits were coming from attorneys when the attorneys had limited involvement in the process, and using unsubstantiated evidence to support lawsuits against consumers.

The lawsuit is case number 1:14-cv-02211-AT-WEJ, filed in the US District Court for the Northern District of Georgia Atlanta Division.