The Consumer Financial Protection Bureau filed a lawsuit on July 14, 2014, in Atlanta federal court against a Georgia-based firm, Frederick J. Hanna & Associates, and its three principal partners for operating an alleged “debt collection lawsuit mill that uses illegal tactics to intimidate consumers into paying debts they may not owe.” The CFPB claimed that the entity produced hundreds of thousands of “shoddy, mass-produced credit-card collection lawsuits” on behalf of major banks. Hanna allegedly filed the lawsuits without performing even basic checks to determine whether the people they sued actually owed debts, and the suits frequently relied on deceptive court filings and faulty or unsubstantiated evidence. Between 2009 and 2013 the firm filed more than 350,000 debt collection lawsuits in Georgia alone, according to the CFPB, and collected millions of dollars each year. The CFPB is seeking compensation for victims, a civil fine, and an injunction against the company and its partners.
“The Hanna firm relies on deception and faulty evidence to drag consumers to court and collect millions,” CFPB Director Richard Cordray said in a statement. “We believe they are taking advantage of consumers’ lack of legal expertise to intimidate them into paying debts they may not even owe.”
According to the CFPB, violations alleged in its complaint include:
- Intimidating consumers with deceptive court filings – The firm files collection suits signed by attorneys when, in fact, the lawsuits are the result of automated processes and the work of non-attorney staff, without any meaningful involvement of attorneys. The resulting lawsuits misrepresent to consumers that they are “from attorneys.” This process allows the firm to generate and file hundreds of thousands of lawsuits. One attorney at the firm, for example, signed more than 130,000 debt collection lawsuits over a two-year period.
- Introducing faulty or unsubstantiated evidence – The firm uses sworn statements from its clients attesting to details about consumer debts to support its lawsuits. The firm files these statements with the court even though in some cases the signers could not possibly know the details they are attesting to. In a substantial number of cases, when challenged, the firm dismissed lawsuits. Since 2009, the firm has dismissed over 40,000 suits in Georgia alone, and the CFPB believes it does so frequently because it cannot substantiate its allegations.