CFPB Files Suit Against Law Firm – Alleging Misrepresentation of Attorney Involvement

Yesterday the Consumer Financial Protection Bureau (CFPB) filed suit against the law firm of Weltman, Weinberg & Reis Co, L.P.A. (WWR) alleging that the firm deceived consumers with misleading calls and letters.

The lawsuit accuses WWR of falsely representing in millions of collection letters sent to consumers that attorneys were involved in collecting the debt. The CFPB claims that the law firm made statements on collection calls and sent collection letters creating the false impression that attorneys had meaningfully reviewed the consumer’s file, when no such review has occurred. The CFPB is seeking to stop the unlawful practices and recoup compensation for consumers who have been harmed.

In the CFPB press release yesterday afternoon CFPB Director Richard Cordray commented:

“Debt collectors who misrepresent that a lawyer was involved in reviewing a consumer’s account are implying a level of authority and professional judgement that is just not true. Weltman, Weinberg & Reis masked millions of debt collection letters and phone calls with the professional standards associated with attorneys when attorneys were, in fact, not involved. Such illegal behavior will not be allowed in the debt collection market.”

WWR based in Cleveland, Ohio, regularly collects debt related to credit cards, installment loan contracts, mortgage loans, and student loans. It collects on debts nationwide but only files collection lawsuits in seven states: Illinois, Indiana, Kentucky, Michigan, New Jersey, Ohio, and Pennsylvania.

In the complaint, the CFPB alleges WWR engaged in illegal debt collection practices. In form demand letters and during collection calls to consumers, the firm implied that lawyers had reviewed the veracity of a consumer’s debt. But typically, no attorney had reviewed any aspect of a consumer’s individual debt or accounts. No attorney had assessed any consumer-specific information. And no attorney had made any individual determination that the consumer owed the debt, that a specific letter should be sent to the consumer, that a consumer should receive a call, or that the account was a candidate for litigation.

The CFPB alleges that the company is violating the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Since at least July 21, 2011, the law firm has sent millions of demand letters to consumers.

Specifically, in the complaint the CFPB alleges that the law firm:

• Sent collection letters falsely implying they were from a lawyer: Weltman, Weinberg & Reis sent letters on formal law firm letterhead with the phrase “Attorneys at Law” at the top of the letter and stated the law firm’s name in the signature line. The letters also included a payment coupon indicating that payment should be sent to the firm. Some demand letters referred to possible “legal action” against consumers who did not make payments. Despite these representations, the vast majority of the time, no attorneys had reviewed consumer accounts or made any determination that the consumer owed the debt, that a specific letter should be sent to the consumer, or that the account was a candidate for litigation before these letters were sent. 

• Called consumers and falsely implied a lawyer was involved: Weltman, Weinberg & Reis’s debt collectors told consumers during collection calls that they were calling from a law firm. Specifically, sometimes they told consumers that it was the “largest collection law firm in the United States,” or that the debt had been placed with “the collections branch of our law firm.” This implied that attorneys participated in the decision to make collection calls, but no attorney had reviewed consumer accounts before debt collectors called consumers.

The CFPB is seeking to stop the alleged unlawful practices of Weltman, Weinberg & Reis. The Bureau has also requested that the court impose penalties on the company for its conduct and require that compensation be paid to consumers who have been harmed.

A complete copy of the complaint can be found here.

The insideARM Perspective 

The CFPB complaint is not a finding or ruling that the defendant has actually violated the law. This is not the first debt collection law firm targeted by the CFPB. The CFPB has made it clear that debt collection law firms are a target for them. 

In June of 2014 insideARM wrote about the CFPB enforcement action against the Georgia law firm of Frederick J. Hanna & Associates.  That case was ultimately settled with a consent order announced in December of 2015.

On December 28, 2015 insideARM published an article by Joann Needleman where Ms. Needleman discussed the significance of the Hanna order and predicted continued oversight by the CFPB over the practice of law in the collection arena.

On April 26, 2016 the CFPB announced the filing of a consent order with the New Jersey debt collection law firm, Pressler & Pressler LLP. The Pressler & Pressler law firm provided their own press release regarding the consent order. A copy of that press release can be found here.

Once the CFPB brings an enforcement action, the challenge for any law firm is the cost and resources necessary to defend themselves against the unlimited resources of the CFPB.

In the Pressler and Pressler press release the firm commented on the need to settle the case:

“This settlement is not about laws or rules that are currently in place,” said Sheldon H. Pressler, managing partner. “Instead, the CFPB has formed its own unique interpretation of federal and state law today and applied those interpretations retroactively to our past practices that were, at the time, in accordance with federal and state laws.

While the firm disagrees with the CFPB’s position, its leaders felt that reaching this agreement was the most prudent course of action to minimize disruption to the practice and the financial impact to the business. Many of the practices required by the settlement have long been in place, so Pressler and Pressler is well-positioned to continue providing a level of compliance that exceeds industry expectations.”

insideARM contacted WWR for comment on the case. WWR provided the following statement from Managing Partner Scott Weltman:

“We fundamentally disagree with the CFPB’s allegations and believe that this lawsuit is the result of our firm’s refusal to be strong-armed into a Consent Order. We are a law firm that is legally allowed, under federal and state law, to provide collection and legal services. We are being truthful with consumers and factually accurate when we use our name and our company’s letterhead for proper debt collection activity. WWR has taken every reasonable step to ensure that it collects on consumer debts in compliance with those statutes and to ensure that every statement made to consumers is accurate and not misleading. I’d also like to emphasize that the CFPB’s two-and-a-half-year investigation into our firm did not uncover a single instance of consumer harm.

WWR cooperated fully with the CFPB since it initiated its Civil Investigative Demand (CID) in September 2014, producing hundreds of thousands of pages of documents and more than 1 million collection phone call recordings, and submitting to two investigational hearings. This was done at significant cost to WWR, but with the goal of proving to federal regulators that its attention to compliance and its by-the-book ethical practice of law is exemplary.

It is not unusual for any large entity in the financial services industry to receive a CID from the CFPB. WWR, which has 65 attorneys and more than 650 employees, represents many of the largest financial institutions in the U.S. in bankruptcy, consumer and commercial collections, litigation, and real estate default matters. WWR has not been the subject of any other formal government actions or disciplinary reviews.

The result of the CFPB’s investigation of our law firm is based on its interpretation of the law, and not on any actual violation of federal or state laws or regulations as they are written today. We will continue to vigorously defend WWR’s honest, ethical and compliant collection practices, and we look forward to our day in court.”

Note the similarity of key statements in both the Pressler & Pressler and WWR comments. Both argue that they did not violate any federal or state laws. Instead they both believe that the CFPB is making rules through enforcement activity. It will be interesting to see whether this case is resolved through some future settlement or whether WWR will proceed to a trial.