The Consumer Financial Protection Bureau yesterday issued a consent order against the law firm of Pressler & Pressler and debt buyer New Century Financial Services for “churning out unfair and deceptive debt collection lawsuits based on flimsy or nonexistent evidence.” Pressler & Pressler was ordered to pay a $1 million fine and New Century was ordered to pay a $1.5 million fine to the CFPB’s Civil Penalty Fund.
The CFPB alleged that Pressler & Pressler filed “hundreds of thousands” of lawsuits against consumers on behalf of New Century Financial Services, a debt buyer based in New Jersey. To file that many lawsuits, the CFPB claims that attorneys at Pressler & Pressler spent as little as 30 seconds reviewing cases on behalf of New Century before initiating a lawsuit. The organizations were accused of violating the Fair Debt Collection Practices Act by:
- Made false or empty allegations about consumer debts: The CFPB found that the firm, the named partners, and New Century filed lawsuits against consumers without sufficient basis. Neither the firm nor New Century reviewed documents supporting the validity of debts.
- Filed lawsuits based on unreliable or false information: Some consumers had previously challenged the validity or accuracy of the debts, but the firm or New Century did not obtain or review information to justify their claims. The firm and New Century also filed suits and collected debt knowing that some account portfolios targeted for lawsuits contained unreliable or false information.
- Harassed consumers with unsubstantiated court filings: The CFPB found that the firm, the named partners, and New Century filed collection suits generated mainly by automated processes that relied on summary data. The firm won the vast majority of the lawsuits by default when consumers did not defend themselves, even though neither Pressler & Pressler nor New Century had verified that the debts were actually owed.
Along with paying the fines, the firms must also agree to stop filing unsubstantiated lawsuits and must possess account-level information that shows the debt is accurate and enforceable, and must ensure accurate court filings.
“For years, Pressler & Pressler churned out one lawsuit after another to collect debts for New Century that were not verified and might not exist,” said CFPB Director Richard Cordray in a statement. “Debt collectors that file lawsuits with no regard for their validity break the law and violate the public trust. We will continue to take action to protect borrowers from abuse.”
A copy of the consent order filed against Pressler & Pressler is available here.
A copy of the consent order filed against New Century Financial Services is available here
