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CFPB Loses FDCPA Lawsuit Against Law Firm

After a four-day trial, the Ohio federal district court hearing the CFPB’s lawsuit against a law firm, Weltman, Weinberg & Reis Co., L.P.A., found that the CFPB had failed to prove its FDCPA and CFPA claims by a preponderance of the evidence.  By injecting some much needed logic in the approach to these types of claims, the decision should serve as helpful precedent.

The CFPB’s complaint alleged that the debt collection letters sent by Weltman, which were printed on the law firm’s letterhead, violated the FDCPA and CFPA because they falsely implied that attorneys were “meaningfully involved” in the collection of the debts.  Having found that the letters could be interpreted to imply meaningful involvement by an attorney, the court concluded that there was “meaningful[] and substantial[] involve[ment by Weltman attorneys] in the debt collection process both before and after the issuance of the demand letters.”

The court reached this conclusion despite its finding that Weltman did not require an attorney to review every individual account before a demand letter was sent and Weltman attorneys did not “form a professional judgment about the validity of a debt or the appropriateness of sending a demand letter before the letters are sent.”  It also concluded that even if the letters had misrepresented the level of attorney involvement, the CFPB still could not prevail “because there is no evidence that any consumer’s decision on when and whether to pay a debt was influenced by the inclusion of the attorney identifiers in Weltman’s demand letters.”

The findings on which the court based its legal conclusion that “Weltman attorneys were meaningfully and substantially involved” included the following:

  • Weltman’s demand letters accurately conveyed the fact that Weltman was a law firm that had been retained to collect the debt in question but did not state that an attorney had reviewed the particular circumstances of the account, mention any potential legal action, and were not signed by an attorney.

  • Before demand letters were sent, attorneys were involved in: drafting client contracts; checking clients’ reputations; discussing certain information with clients, including the available data and documentation, the history of clients’ portfolios and types of accounts, which consumers were represented by attorneys, any asset reviews that had occurred, and bankruptcy information; reviewing clients’ policies and procedures; evaluating clients’ trustworthiness and legal compliance; obtaining warranties as to the validity of the debts to be collected; sampling documentation and terms of accounts (including reviewing statutes of limitation and determining when arbitration is required); and creating data “scrubbing” procedures and criteria to identify consumers who should not receive collection letters.

  • Weltman had a formal compliance program that was developed and approved by attorneys (including attorney Board members) and conducted routine audits.

  • Attorneys drafted the demand letter templates, oversaw all departments, and were responsible for the training and oversight of non-attorney staff.

  • Weltman collected debts for the State of Ohio using demand letters that were substantially similar to the ones at issue and followed the same processes and procedures used for other clients.  Such letters were approved by the then Ohio Attorney General, Richard Cordray, who nevertheless authorized the CFPB’s lawsuit against Weltman.

Copyright © by Ballard Spahr LLP

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About this Author

Culhane, Ballard, Partner
Partner

John L. Culhane, Jr., is known for his work advising on interstate direct and indirect consumer and residential mortgage loan and leasing programs, through both traditional brick-and-mortar facilities and e-commerce. Before joining Ballard Spahr, Mr. Culhane was associate counsel with Mellon Bank, N.A.; associate counsel with Bank of America NT&SA; and senior attorney (section chief) with the National Credit Union Administration, the federal agency regulating federal credit unions.

Mr. Culhane addresses issues involving licensing,...

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