Debt Collection Lawsuit Mill Stopped

Recently, the Consumer Financial Protection Bureau filed a proposed consent order against Frederick J. Hanna & Associates and its three principal partners for operating an illegal debt collection lawsuit mill. The CFPB alleges that the firm relied on deceptive court filings and defective evidence to “churn out lawsuits.” According to the CFPB director Richard Cordray, “The Hanna firm relied on deception and faulty evidence to coerce consumers into paying debts that often could not be verified or may not be owed.” The order filed would require the firm and its principals to pay $3.1 million and would bar the firm from future illegal debt-collection practices.

The Hanna Law Firm is Georgia-based law firm that focuses on debt collection litigation. The clients that the firm tends to work with include banks, credit card issuers, and companies that buy and sell consumer debt. It is alleged that this firm filed several lawsuits signed by attorneys when, in fact, these suits were the result of automated processes and non-attorney staff. This process allowed the firm to generate and file several hundreds of thousands of lawsuits. For example, one attorney in the firm “signed” over 130,000 debt collection lawsuits over a two-year period. Additionally, the firm introduced faulty or unsubstantiated evidence in thousands of lawsuits. When challenged many cases were dismissed because the firm could not substantiate its allegations. Between 2009 and 2014, over 40,000 suits were dismissed for this reason.

If approved, the proposed consent order would end the firm’s illegal collection and intimidation tactics, clean up attorney practices, prohibit deceptive court filings, and order the firm to pay a $3.1 million penalty. The firm would be prohibited from filings lawsuits or threatening to sue consumers unless they possess the proper information showing that the debt owed in accurate and enforceable. Additionally, the attorneys within the firm must review specific consumer-debt related documentation and create a record of the review. During litigation, the firm commonly filed sworn statements from its clients even though some of the signers could not have known the details they were attesting to. This proposed order would prohibit the firm from using affidavits as evidence for debt collection suits unless the statements “specifically and accurately describe the signer’s knowledge of the facts and the documents attached.”

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