Giant Collection Law Firm Sued by Government for Deceptive Practices

The Consumer Financial Protection Bureau (a federal agency) has filed a lawsuit in federal district court against Frederick J. Hanna & Associates and its three principal partners for operating a “collection lawsuit mill” that uses illegal tactics to intimidate consumers into paying debts they may not owe.

According to the CFPB, Hanna & Associates violated federal law which prohibits deceptive practices in the consumer financial marketplace. The Agency wants compensation for victims, a civil fine and an injunction against the firm and its partners.

The allegations in the complaint include:

• intimidating consumers with deceptive court filings. Hanna & Associates allegedly used automated processes to generate lawsuits with little or no involvement by attorneys. One of the firm’s lawyers, for example, “signed” more than 130,000 collection lawsuits in a two year period.
• introducing faulty or unsubstantiated evidence. Lawsuits filed by Hanna & Associates included sworn statements about a particular individual’s debts. These sworn statements were issued by officers of the banks, credit card issuers and debt buyers who had hired the Hanna firm. The CFPB argues that these officers could not possibly have had personal knowledge about the individual cases and that the Hanna firm has dismissed over 40,000 suits in Georgia alone when these sworn statements were challenged by defendants.

In a statement, Hanna & Associates denied any wrongdoing and stated that it has followed all state and federal laws.

I will keep an eye on this litigation and let you know if the Hanna firm reaches a settlement with the CFPB or if the case goes to trial.

While this particular litigation may not impact you directly, I hope that you pick up a few things from this case.

First, just because a plaintiff (credit card company, debt buyer, etc.) makes an assertion against you in a lawsuit, you should not automatically assume that you have no defense.

Perhaps you think that you do owe money to the plaintiff. However, if the debt is stale (the statute of limitations for collection may have run) or if the plaintiff has little or no documentation proving you owe money, you would have a viable defense.

Second, credit card companies and other consumer debt issuers most likely do not have paper files. Their “documentation” may be an internal ledger sheet or a bogus “sworn statement” from a company official. This documentation can be challenged and may give you leverage to negotiate.

As always, if you get sued do not ignore the lawsuit. If you do not respond (or call a lawyer for advice) within the set time to respond (usually 30 days) your case will go into default and all of your options to challenge the legitimacy of the lawsuit will disappear.

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