The Winding Road of Litigation Against Frederick J. Hanna Nears End With CFPB Filing Proposed Consent Order Today; Hanna and NARCA Respond

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Today the CFPB filed a proposed consent order in federal court that would end its lawsuit that began in July 2014 against Frederick J. Hanna & Associates P.C. The Bureau alleged that the firm filed thousands of collection lawsuits per year against consumers without “meaningful involvement” by the firm’s attorneys, and that it relied on faulty evidence.

Over the last eighteen months the case has taken many turns. The latest was last month, when United States District Court Judge Amy Totenberg issued an order denying Hanna’s request to certify the case for an interlocutory appeal.

According to a CFPB press release, the proposed order, if approved by the court, would:

  • End illegal collection and intimidation tactics: The Hanna law firm and its principal partners would be prohibited from filing lawsuits or threatening to sue to enforce debts unless they have specific documents and information showing the debt is accurate and enforceable.
  • Clean up attorney practices: Under the proposed order, the Hanna law firm and its partners would be prohibited from filing or threatening lawsuits unless they or their attorneys have reviewed specific documentation related to the consumer’s debt. The law firm would also be required to create a record of that review.
  • Prohibit deceptive court filings: The CFPB alleged that the firm files sworn statements from its clients with the court even though in some cases the signers could not possibly know the details they are attesting to. Under the proposed order, the defendants would not be permitted to use affidavits as evidence to collect debts unless the statements specifically and accurately describe the signer’s knowledge of the facts and the documents attached.
  • Pay a $3.1 million penalty: The firm and its principal partners would be jointly required to pay a $3.1 million penalty to the CFPB’s Civil Penalty Fund.

In separate enforcement actions earlier this year, the CFPB has ordered three of the Hanna law firm’s clients, JPMorgan Chase, Portfolio Recovery Associates, and Encore Capital Group, to overhaul their debt collection practices and to refund millions to consumers.

You can read the CFPB’s December, 28 2015 proposed consent order here

You can read the CFPB’s original July 14, 2014 complaint against Hanna here

The Hanna law firm released this statement today:

“Frederick J. Hanna & Associates, P.C. (FJH) entered into a Negotiated Settlement Agreement with the Consumer Financial Protection Bureau (the “Bureau”) which brings an end to a nearly two-and-a-half year investigation and pending federal lawsuit in the United States District Court for the Northern District of Georgia.  A core component of the Settlement Agreement is that FJH and its named partners have admitted to no wrongdoing; and there was no adjudication of any wrongdoing, deception, or consumer harm.

FJH entered into the Settlement Agreement not only to halt the relentless expense and uncertainty of protracted litigation with the Bureau; but also with the sincere hope that the requirements set forth in the Settlement Agreement will assist attorneys in reconciling the nebulous principle of “meaningful attorney involvement” with State Law rules of civil procedure, evidence, and ethical rules of conduct.

In spite of the Bureau’s allegations about our firm, we did not institute any pattern or practice with the intent to deceive or harm consumers, and there has been a robust and substantial compliance management system with redundant levels of due diligence in place at FJH for many years.  At all times, FJH followed the spirit of the Professional Rules of Conduct and complied with the Georgia Civil Practice Act.

Moreover, many of the requirements outlined in the Settlement Agreement with the Bureau are reflective of policies and procedures that have been in place at FJH for a period of years, together with many additional layers of mature policies and procedures in place to comply with consumer protection laws.

FJH cooperated fully with the Bureau over the course of this matter and is committed to continuing that cooperation to ensure that its policies and procedures treat consumers fairly, while still upholding a lawyer’s duty to provide zealous representation and advocacy for his or her clients in accordance with the professional rules.  We thank our many peers and colleagues across the country for their unwavering support and encouragement throughout this process.”

NARCA, the National Creditor’s Bar Association, of which the Hanna firm is a member, also released a statement today, in which it expressed:

“NARCA understands that many consent orders are entered into because the cost of fighting is overwhelming and believes that the current consent order falls in that category.

The Consent Order continues the trend of federal agencies treading upon the separation of powers by trying to regulate the litigation activities of lawyers who turn to the courts in order to help recover unpaid consumer debts. The right to petition for redress through the courts is a constitutional right guaranteed by the First Amendment, and the courts are fully empowered to make sure that this right is exercised in a fair and just manner for all parties in each lawsuit.

Lawyers are officers of the court who must answer to the court for the way they conduct litigation. At the same time, to the extent that the CFPB has the authority to regulate debt collection litigation, law firms require regulatory certainty and even-handed enforcement, so that they can do the longer-term planning critical for growth and success. While consent orders can provide some guidance to creditor law firms, the biggest takeaway from enforcement complaints and settlement agreements is that the Bureau knows unlawful activity when it sees it. Without clear and concise rules, industry is forced to scramble to figure out what is acceptable.”

insideARM Perspective

This case is incredibly significant for the ARM industry. insideARM has been following it from its inception. Over the upcoming days and weeks collection lawyers, clients, and anyone involved in the filing of collection lawsuits will be scrutinizing and analyzing the settlement agreement and Consent Order.

As the ability to communicate with consumers continues to be limited by a shift from land lines to cellphones, TCPA litigation fears, and an increased consumer fear of telephone collection scams, the use of litigation as a tool to collect delinquent accounts has increased. This case has the potential to be the only CFPB direction on the subject unless and until formal rulemaking begins.

insideARM encourages a thorough and thoughtful review of the case.  In 2016 we hope to lead the engagement of the impacted parties and the meaningful dialogue on the implications.

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

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Continuing the Discussion

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  • avatar Tom Brannon says:

    What do legal professionals think about this? Is a legal team, for which the lead attorney is responsible (according to the GA State Bar), doing no meaningful work (and is this under the direction of the attorney, or maybe the firm)? Who gets credit for the numerous tasks going on – apparently not the lead attorney! Is the way debt-buyers do business a good reason to write consent orders against law firms who accept that work? Finally, does this Order claim that checking all attributes and staging a case to be appropriately and legally filed is not a legal task? Is this the end of the para-legal profession? I can’t help remembering the PRA and Encore Orders – they directed law firms to establish their full-blown compliance programs – ALL law firms.

  • avatar bill-jones says:

    Ah, the “we did nothing wrong but will pay millions because the legal fees are getting too high” excuse. This is almost a bigger joke then the quote below by insideARM:

    “As the ability to communicate with consumers continues to be limited by a shift from land lines to cellphones, TCPA litigation fears, and an increased consumer fear of telephone collection scams, the use of litigation as a tool to collect delinquent accounts has increased.”

    A PC way of saying “We are using the court system because it is easier.”

    Nice attempt to sugar coat when the reality is collectors love to use the court system because it intimidates consumers. It is not about “getting their attention because we are too afraid contacting them via phone would result in a $1000 fine and letters are not harassing enough.”

    Why perform due diligence and actually do a job when you can get 1000′s of summary judgments based on a $0.02 on the dollar portfolio filled with errors. I love when the only documentation presented to the court is a line item on a spread sheet; brilliant! You have to love law firms who represent collectors, a perfect place for those incompetent lawyers who graduated at the bottom of their classes.

  • avatar todd bean says:

    We did nothing wrong, and here is a $3,000,000.00 check to prove it.

    I wish the regulatory agencies would do what criminal courts do and no let somebody plead guilty while at the same time proclaiming they did nothing wrong.

  • avatar gern-blansden says:

    I’ll copy/paste my comment from a similar blog on this site, with this addendum…”First Amendment, really?:

    Your blog shows your obvious view as a debt collector/attorney.

    What is being obfuscated and overlooked here is that just because there is an attorneys name on the sign out front, doesn’t mean they are running the “law firm”.

    Cut it out, please.

    99% of all collection law firms (and I don’t say 100% because there may be ONE out there, but I have never come across one) are not run by the named attorney/s or their partners. They are run by aggressive and usually undereducated “managers”, “Directors of Operations”, “VP of Operations”, “General Managers”, “Collection Managers”…call them what you will…who are “managing” the day to day operations of the law firm.

    Not licensed attorneys, and in addition, these non-attorney “managers” and their employees are making commissions off of their collection efforts, and those commissions at a law firm constitute fees, and in order to collect fees, an individual collecting such fees must be a lawyer, thereby making this practice of earning commission illegal at a law firm in most states. Nes pas?

    THIS is why there is an FDCPA and now the CFPB, because the majority of collectors are uneducated and cold-blooded and could never hope to make anywhere near the kind of money they can make in any other occupation other than debt collection.

    Please. Some of these collectors make over $100k per year.

    Stand back and take away the veneer of legalese, the truth is much more simpler, as simple truths usually are.

    Hanna, Joe Cooling, and Robert Winter know this. Don’t be fooled by this tripe.

  • avatar jan-curtis says:

    I received a phone call yesterday on my secondary cell phone of which I use for nothing more than an emergency backup in the event I should lose my everyday phone or possibly run out of battery.No message was left. I never give this number to anyone and to my knowledge the number is not traceable. Have even checked it out myself to see if it is listed any place on line. I called the number only to hear this man with a thick foreign accent (could barely understand what he was saying) saying immed. after answering the call that it was an attempt to collect a debt.. something about liens, process service papers, things of that nature.. and I told him in plain spoken english I did not owe anyone any money.. I did not know who he or his company was and not to call my number again. It went one step further to a young lady who mentioned a name which sounded like a Hispanic name and asked did I want my number removed and needless to say,needless to say the answer was YES and I immediately ended the call. Researching the number from which I was called showed a company name of Frederick J Hannah & Assoc… Googled this name and it is a collection agency in Marietta Ga. I further read on this site about the Federal law suits and settlements for which this Firm obviously is associated with in one way or another with the companies listed in the article. I do not know who had the phone number before me secondary but this company certainly made a mistake when they began to tell me it was “an attempt to collect a debt”. Someone obviously someone did not do a very thorough investigation prior to calling my number. Will retain this information in the event any further contact to my number is received and I will file a report with the proper court(s) .

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