The CFPB’s Evolving “Meaningful Attorney Involvement” Standard

By Steven J. Kubik

The CFPB recently entered a consent order (the “Order”) targeting consumer debt collection law firms and challenging an alleged lack of “meaningful attorney involvement” necessary in consumer debt collection actions.

Takeaway

While the Order sheds light on the CFPB’s expectations concerning what constitutes “meaningful involvement,” the standard remains an evolving one. One thing is clear–creditors and law firms should expect increased scrutiny regarding attorney involvement in consumer collection matters. Prudent practice calls for comprehensive and well documented attorney involvement from the beginning of collection efforts.

The Order Details

The order was issued against two Oklahoma-based debt collection law firms and their principal. It alleges[1] conduct that violates the Fair Debt Collection Practices Act (the “FDCPA”) and Fair Credit Reporting Act (the “FCRA”). Further, it requires the firms to pay $577,135 in restitution to consumers, change their business practices, and pay a $78,800 penalty to the CFPB’s Civil Penalty Fund.

Specifically, the Order alleges that the firms violated the FDCPA and FCRA as follows:

Misrepresentations Regarding Attorney Involvement. The firms allegedly sent demand letters on law firm letterhead including attorneys’ names when no attorney had reviewed the account documentation. Further, the firms allegedly stated on collection calls that they were calling from a law firm when no attorney had reviewed the file. According to the Order, this conduct misled consumers that the collection efforts were either from an attorney, that the firm’s attorneys were meaningfully involved in reviewing the Consumer’s case, or had reached a professional judgment that the demand for collection was warranted.

Notarizing Client Affidavits Without Verification. The firms obtained affidavits from clients to use in debt collection lawsuits against consumers. In some instances, the firms would receive non-notarized affidavits from clients and allegedly notarize the affidavit for the client without any verification of the signature. Accordingly, this conduct allegedly misrepresented that the affidavits had been verified and notarized in accordance with Oklahoma law.

Furnishing Information to Credit Reporting Agencies without Written Policies. The firms allegedly furnished information to credit reporting agencies without having written policies and procedures addressing the transmission of consumer information, as required under the FDCPA.

This Order is the CFPB’s third consent order since late 2015 targeting consumer collection law firms and the “meaningful attorney involvement” standard. In December 2015, the CFPB entered a consent order against a Georgia-based law firm based upon allegations that its attorneys did not review account documentation before filing suit. Instead, the firm used an automated and non-attorney staff to generate more than 130,000 lawsuit complaints in a two-year period signed by a single attorney. The CFPB entered a similar consent order in April 2016 with a New Jersey-based consumer debt collection law firm. The CFPB again challenged the firm’s over-reliance on automated software, non-attorney staff, and found that attorneys often spent less than several minutes reviewing each file before filing suit.

Notably, this Order expands on the CFPB’s meaningful attorney involvement standard by prescribing specific conduct that the law firms must follow:

  • If an attorney has not been meaningfully involved in reviewing the consumer’s account and has not made a professional assessment of the debt, the firm may not:
    • State or imply that written communication concerning the collection of a debt is from or on behalf of an attorney;
    • State or imply that a phone call regarding collection of the debt is from or on behalf of an attorney;
    • Refer to “attorneys” or a “law firm” in any automated message that plays for consumers calling from the firm regarding a debt;
    • State or imply an attorney has reviewed the account; or state or imply that the firm may file suit or seek legal action.
  • In those instances the law firm should instead:
    • Include the following in all written communications with the consumer:
      • A disclaimer that no attorney has reviewed the account at issue;
      • State in the signature block that the letter is from the “collections department;” and
      • Omit the name of any attorney and the phrase “attorney at law” from the signature block.
    • In any oral communications with consumers:
      • The firm must include a disclaimer that no attorney has reviewed the account at issue; and
      • Clearly identify the person making the call, his job title, and identify themselves as being from the “collections department.”
    • The firms may not refer to potential litigation or commence suit unless and until an attorney has:
      • Reviewed the original account level documents, which includes at least the following: the consumer’s name, the last four digits of the account number and the claimed amount, a document signed by the consumer evidencing the opening of the account or original account level documentation reflecting a purchase payment or actual use by the consumer or other documentation authorizing the creation of the account;
      • Made a professional assessment of the delinquency; and
      • Obtained client consent to file on the specific account.

[1] The Order was entered without admission of any facts or conclusions of law except those required for jurisdiction.