CFPB Files Amicus Brief in FDCPA case

On Thursday of last week the Consumer Financial Protection Bureau (CFPB), jointly with the Federal Trade Commission (FTC), filed an amicus brief with the U.S. Court of Appeals for the Third Circuit in Bock v. Pressler & Pressler, LLP. In the case a U.S. district court previously ruled that a debt collection law firm violated the Fair Debt Collection Practices Act (FDCPA) by filing a complaint without “meaningful attorney involvement.”

The filing is hardly surprising given the CFPB position in the ongoing litigation involving the Georgia law firm Frederick J Hanna & Associates P.C.

The CFPB argues that the facts in Pressler are undisputed:  The law firm utilizes a computer system to manage its files, a lawyer in the firm conducts an automated review of files for potential litigation, and computer records show that the attorney spent 4 seconds reviewing the computer records for this particular file.  The CFPB’s positon:

“Under any conceivable standard, four seconds is not enough to become meaningfully involved and form a professional judgment about the appropriate action to take. For that reason, Pressler’s representation that an attorney had done so was deceptive and violated the FDCPA.”

The law firm’s position is that the lengthy review process set up through their computer system and subsequent attorney review is sufficient attorney involvement.

The arguments raised in the brief are basically the same arguments the Bureau has raised in the aforementioned Hanna litigation, but applied to the specific facts of Pressler. They are:

Filing a Debt-Collection Lawsuit Without Meaningful Attorney Involvement Violates the FDCPA.

a) The FDCPA prohibits attorney debt collectors from making misrepresentations in litigation.
b) Filing a debt-collection lawsuit without meaningful attorney review unlawfully misrepresents the attorney’s involvement in the case.
c) The Pressler attorney’s four-second review did not constitute meaningful attorney involvement.

• Setting up a review process does not excuse the attorney from exercising professional judgment.
• No Attorney exercised professional judgment in the case.

d) The Constitution does not prevent the FDCPA from barring misrepresentations that attorneys make in debt-collection litigation.

• Attorney debt collectors have no First Amendment right to make misrepresentations in debt-collection litigation.
• Federalism principles do not preclude Congress from regulating attorney debt collectors’ litigation conduct.

insideARM Perspective

This case is another example of the potential rules of the road in the future for collection attorneys.  Anticipated rulemaking from the CFPB is likely to address these same issues.

It should be noted that the case involves debt that was sold – twice – before the litigation was commenced. Debt buying has proven to be a particularly vexing issue for the CFPB. The account in question was sold initially by HSBC to a debt buyer, then from the first debt buyer to Pressler’s debt buyer client.

The issue for collection attorneys going forward will be: What level of inquiry is required to pursue litigation on purchased debt? Will the level of scrutiny be higher on debt that is re-sold?  Finally, will the same level of scrutiny be required for attorneys who work directly for the original creditor?