In this latest episode of Debt Collectors Behaving Badly, we bring you the tale of two medical debt collection law firms who must now refund hundreds of thousands of dollars after they were caught falsely claiming that attorneys were involved in collection actions.
According to the Consumer Financial Protection Bureau, the two Oklahoma-based law firms — both named Works and Lentz — misled debtors by exaggerating the extent to which actual lawyers were involved in these attempts to collect debts.
The companies, which collect medical debt on behalf of hospitals, doctors, and other healthcare providers, attempt to make collections on 700,000 accounts annually.
According to the CFPB’s complaint [PDF], from Jan. 2012 to Aug. 2016, every letter sent to alleged debtors was printed on the firms’ letterhead, immediately giving the impression that a legal action was pending.
About a month after sending this initial letter, Works and Lentz assigned the account to a manager who contacted the debtor, representing themselves as a law firm, the suit states.
Additionally, when a consumer called the firm back, they were greeted with a message that stated, “You have reached Works & Lentz, Attorneys at Law.”
If borrowers had not provided payment on the debt by this point, the account manager sent an additional demand letter, once again including the term “Law Office” on the letterhead.
Each of these letters contained one or two threats related to filing a lawsuit against the borrower: “There may be no alternative but to file a lawsuit against you,” or “There may be no alternative but to request permission from our client to file a lawsuit against you.”
The letters concluded with a computerized signature of an individual attorney, with the title “attorney at law.”
Despite these assertions, the CFPB alleges that in most cases no attorney had reviewed the accounts.
Under the The Fair Debt Collection Practices Act, it is illegal for firms to use false, deceptive, or misleading representations or means to collect a debt, including using the false implication that any individual is an attorney or that communications are from an attorney when they are not.
Additionally, the CFPB claims in its complaint that Works and Lentz solicited signed and notarized affidavits from its clients before filing a lawsuit against borrowers.
However, in some cases the affidavits were returned with a non-notarized signature. In these incidents, Works and Lentz notarized the affidavit without verifying the signatures.
In addition to misrepresenting that they are attorneys, the CFPB alleges that employees of Works and Lentz provided information to credit reporting agencies related to consumers’ debts without ensuring the information was accurate.
Until July 2016, the CFPB claims that Works and Lentz lacked any written policies or procedures regarding its transmission of information to a credit reporting company or any protocols to ensure the accuracy and integrity of this information.
As part of the CFPB’s enforcement action, Works and Lentz must stop using deceptive language in their letterheads, prohibit unauthorized notarization, and revise its credit reporting protections.
Additionally, the company must provide $577,135 in refunds to debtors who made payments as a result of receiving threatening letters, and must pay $78,800 to the CFPB’s Civil Penalty Fund.
This isn’t the first time that a debt collector has run into trouble related to law firm representation.
In 2015, the CFPB accused one collector of using prosecutors’ letterhead to create the false impression that consumers may be prosecuted for writing bounced checks – before their cases were ever reviewed by the proper authorities.
Still, in May 2016, the Supreme Court of the United States approved a private debt collector’s use of a prosecutors’ letterhead in correspondence with consumers about debts in certain circumstances, such as when it’s done with the state’s approval.