A New Jersey-based law firm that handed out hundreds of thousands of debt-collection lawsuits based on false or nonexistent information must — along with an associated debt buyer — pay $2.5 million in penalties to settle federal accusations that they were operating a lawsuit mill in violation of the law. 

The Consumer Financial Protection Bureau announced Monday that it had taken action against law firm Pressler & Pressler, LLP, its two principal partners — Sheldon Pressler and Gerard Felt — and debt buyer New Century Financial Services, Inc., for filing inaccurate mass-produced lawsuits targeting consumers in debt.

According to the CFPB consent orders with Pressler & Pressler [PDF] and New Century Financial [PDF], from 2009 to 2014, the law firm filed more than 500,000 lawsuits against consumers on behalf of clients who sought payment for debts they purchased.

One such client was New Century Financial, a New Jersey-based company that purchases defaulted consumer debts and handed off those accounts to Pressler & Pressler for collection.

A CFPB investigation found that once Pressler & Pressler obtained the defaulted accounts, it used an automated claim-preparation system and non-attorney support staff to determine which consumers to sue.

In some cases, the CFPB found that consumers had previously challenged the validity or accuracy of debts. However, New Century did not obtain or review information to justify its claims that debts were valid.

Actual attorneys generally spent less than a few minutes, sometimes less than 30 seconds, reviewing each case before initiating a lawsuit.

“At the time of the signing attorney’s review, the signing attorney did not have access to sufficient documentation to confirm the validity of the summary data provided by the client,” the complaint states.

This review process allowed the firm to generate and file hundreds of thousands of lawsuits against consumers in New Jersey, New York, and Pennsylvania that were not independently investigated or verified, including whether the facts alleged were true.

The CFPB alleges that the firms violated the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibits unfair and deceptive acts or practices in the consumer financial marketplace.

Under a consent order, Pressler & Pressler, its partners, and New Century have agreed to pay fines and revamp their practices in order to settle the CFPB’s allegations.

Pressure & Pressler, along with Pressler and Felt, must pay $1 million the CFPB’s civil penalty fund, while New Century must pay $1.5 million.

Additionally, the companies must stop filing lawsuits with unsubstantiated claims and must ensure that any future court filings contain accurate facts and affidavits.

“For years, Pressler & Pressler churned out one lawsuit after another to collect debts for New Century that were not verified and might not exist,” CFPB Director Richard Cordray said in a statement. “Debt collectors that file lawsuits with no regard for their validity break the law and violate the public trust.”

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