Law Firm Must Pay $3.1M For Operating Automated Debt-Collection Lawsuit “Factory”

Screen Shot 2015-12-28 at 12.49.39 PMA Georgia-based law firm behind hundreds of thousands of debt-collection lawsuits, and its principal partners, have agreed to pay a total of $3.1 million in penalties to settle federal accusations that they were operating a lawsuit mill in violation of the law.

In July 2014, the Consumer Financial Protection Bureau sued Frederick J. Hanna & Associates — a law firm that specializes exclusively in debt collection actions — and its principals, alleging that they relied on deceptive court filings and faulty evidence to churn out lawsuits.

According to the complaint [PDF], the firm used the court system for purposes of intimidation to coerce consumers into paying debts that often could not be verified or may not be owed.

Hanna & Associates filed hundreds of thousands of lawsuits on behalf of its clients — including JPMorgan Chase, Bank of America, Capital One, and Discover.

“To produce so many lawsuits, the Firm operates less like a law firm than a factory,” reads the complaint. “It relies on an automated system and non-attorney support staff to determine which consumers to sue.”

These not-lawyers at Hanna would, according to the CFPB, “produce the lawsuits and place them into mail buckets, which are then delivered to attorneys essentially waiting at the end of an assembly line.”

Meanwhile, the actual attorneys at the firm were only expected to spend “less than a minute reviewing and approving each suit.”

The CFPB investigation found that one attorney at the firm signed over 130,000 debt collection lawsuits over a two-year period, equating to about 1,300 lawsuits a week.

In addition to misrepresenting that lawsuits were filed by actually attorneys, the CFPB found that many of the cases relied on faulty or unsubstantiated evidence of consumers’ debts.

The firm filed these statements with the court even though in some cases the signers could not possibly have known the details they were attesting to, the CFPB states.

When this evidence was questioned, the company dismissed the suits. Between 2009 and 2014, the CFPB found Hanna Law Firm dismissed nearly 40,000 lawsuits because of bad evidence in Georgia alone. That comes out to about 155 dismissals per week, in just one state.

Under the CFPB’s consent order [PDF], Hanna Law Firm and its partners would be required to pay $3.1 million to the CFPB’s Civil Penalty Fund, end its illegal collection and intimidation tactics, prohibit deceptive court filings, and clean up attorney practices.

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