The Consumer Financial Protection Bureau yesterday announced it had reached a proposed settlement with a collection law firm that it sued in 2019, requiring the firm to pay a fine of $100,000, dismiss certain pending collection lawsuits, and ensure it possesses specific documents before filing collection lawsuits in the future.
A copy of the proposed order — which needs to be signed off by the judge in the case, and in which the defendant neither admitted nor denied any wrongdoing — can be accessed by clicking here.
The original suit accused Forster & Garbus of using non-attorney support staff and a “cursory and deficient review” of accounts to collect on 99,000 debts during the past five years. The firm filed nearly 100,000 lawsuits between 2014 and 2016 even though it had a staff of 10-to-11 attorneys in addition to the named partners. The complaint alleged the defendant violated the Fair Debt Collection Practices Act by using false, deceptive, or misleading representations and the Consumer Financial Protection Act’s prohibition against deceptive acts and practices.
Under the terms of the proposed order, the defendant will be required to possess certain documents with specific information — including the name of the original creditor, evidence that the consumer authorized the debt, the chain of title, and a breakdown of how the debt amount was calculated — before filing any collection lawsuit. The firm will also have to certify that the attorney whose name appears on the complaint reviewed the supporting documentation and ensured the complaint is consistent with that documentation. Any pending lawsuit in which the firm does not certify its compliance with the specific information and meaningful attorney review requirements will be dismissed.
Using the proposed order as an opportunity to name drop, Rohit Chopra, the Director of the CFPB said, “Forster & Garbus bombarded its customers with sketchy lawsuits on behalf of big lenders like Discover and Citibank. The CFPB will be scrutinizing large financial companies that enlist debt collection outfits operating lawsuit mills.”
