ARM Law Firm Files Motion to Dismiss CFPB’s FDCPA Enforcement Action

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Debt collection law firm Frederick J. Hanna & Associates filed a motion Friday to dismiss an enforcement action initiated by the Consumer Financial Protection Bureau. The CFPB’s lawsuit accused the firm of filing too many collection lawsuits, which it said was a violation of the FDCPA.

In July, the CFPB accused the law firm and its three principal partners of operating “like a factory,” producing hundreds of thousands of debt collection lawsuits against consumers on behalf of its clients, mainly major credit card-issuing banks and debt buyers.

The CFPB said that communications, and even the debt collection lawsuits themselves, could not have come “from attorneys” due to the volume of lawsuits compared to the number of attorneys on staff. Hanna’s lawsuits, therefore, were the result of automated processes and the work of non-attorney staff, without any meaningful involvement of attorneys, a violation of the FDCPA and other provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Bureau’s enforcement action seeks unspecified compensation for victims, a civil fine, and an injunction against the company and its partners.

When the CFPB announced its lawsuit, the Hanna firm strongly denied the allegations and vowed to fight the lawsuit. The firm made good on that promise Friday with its 51-page motion filed in a U.S. district court in Georgia.

The central issue, according to Hanna, is the authority – or lack thereof – the CFPB has to regulate the practice of law. Since the CFPB’s allegations exclusively involve the firm’s actions in filing suits and supporting the suits with affidavits, the CFPB does not have the proper standing to regulate the actions.

Furthermore, the firm points out that that the “meaningful involvement” provision of the FDCPA has become a legal standard relating to collection letters, not to actual debt collection suits filed in court.

The CFPB has seen its authority to regulate certain businesses challenged recently. In early 2014, it won a ruling from a federal court that rejected a Constitutional challenge to the CFPB’s structure and right to exist. The CFPB had sued Morgan Drexen for actions it took in the debt relief industry. That particular case, and the court decision in January, was noted in Hanna’s motion filed Friday.

Hanna said that “Unlike the claims against Morgan Drexen, the Bureau’s claims in this case are based solely on conduct—filing lawsuits—that is unquestionably ‘the practice of law’ under any possible meaning of that phrase.”

Hanna is being represented by financial services defense firm Ballard Spahr and by co-counsel firm Balch & Binghan, which boasts a former Attorney General of Georgia as one of its partners.

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Posted in CFPB, Collection Law Firms, Collection Laws and Regulations, Debt Collection, Featured Post .

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  • avatar m. w. keith says:

    Lacking copies of complaint and answer, speculating specifically, it is the number of filings which is not the practice of law as is the filing itself. Sorry.

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