mug blittAs we know, the Consumer Financial Protection Bureau (CFPB) has been actively auditing the large credit grantors throughout the country and reviewing the manner in which these creditors collect debt. The result of these audits has led to penalties and resulted in significant changes for vendors who collect debt on behalf of these creditors.

Over the past two years, I have written a number of times about a huge increase in compliance experienced by debt collection law firms. Topics like call monitoring, documentation, policies and procedures, and background checks have become the new normal.

The CFPB has also begun to review collection law firm policies and procedures making the same inquiries. One such inquiry resulted in a lawsuit being filed on July 14, 2014 against Frederick J. Hanna and Associates (Hanna) located in Georgia, the first of its kind against a debt collection law firm. In sum, the CFPB alleged that Hanna failed to have attorneys properly review the court filings and that they failed to have proper documentation to file the collection lawsuits.

On September 12, 2014, Hanna filed a motion to dismiss the enforcement action brought by the CFPB. This motion contends that the claims brought by the CFPB are barred because under the Dodd-Frank Act, the CFPB is prohibited from bringing claims against a lawyer regarding the practice of law. Further, the motion asserted that there is no standard under federal law requiring “meaningful attorney involvement” and that the CFPB’s attempt to make claims on matters dating back to 2009 is barred by the one-year statute of limitations under the FDCPA.

On October 3, 2014, the CFPB filed its response to Hanna’s motion to dismiss. Hanna filed its reply on October 24, 2014.

One of the major arguments is whether the CFPB has the authority to regulate attorneys in the practice of law. If attorneys are regulated by their state’s supreme courts and rules of ethics, how can the CFPB regulate these same attorneys too? Moreover, why are debt collection attorneys treated differently than any other attorney when they practice law? Compounding this concern is the fact that a similar claim was brought before Georgia Supreme Court, the governing body for attorneys in that state, and no wrongdoing was found against Hanna. Nonetheless, the CFPB has explicitly stated it is not bound by adjudications made by other bodies and can pursue actions against collection actors even where the facts may have been decided.

Here is what I know for certain: The costs of litigating these issues in federal court against the CFPB are significant. Huge amounts of time and money will be expended. I cannot help but wonder what is really the end game? One of the stated goals of the CFPB is to benefit consumers during the debt collection process. I am not sure how the lawsuit will achieve that goal. For example, I’m not sure I completely understand the significance of the discussion of “meaningful involvement” as it relates to the use of properly trained and supervised paralegals in setting up the file for later attorney review. This is not to say there should not be any attorney involvement but it does beg the question as to why the use of electronic scrubs or paralegals are inherently a bad thing for collection law firms? Keep in mind every state regulatory body has ethical rules and standards that allow the use of paralegals under attorney supervision. We can all think of numerous ways paralegals assist other law practices as key members of the law firm staff. Why is paralegal involvement acceptable in non-collection settings but suddenly sanctionable when assisting in preparation of collection lawsuits?

If the CFPB really wants to help consumers, my suggestion is to work with licensed and ethical debt collection attorneys to help achieve real changes. Filing lawsuits against debt collection attorneys merely forces both sides to dig in their heels and fight. Likewise, focusing on cases from 2009 cannot create change because the industry has changed dramatically over the past 5 years. The 2008 financial crisis changed the credit and collections landscape, causing lenders, law firms and legislators alike to look at credit differently and to broaden efforts to make the process more transparent to consumers. Looking at a time frame when those changes did not exist provides no solace to consumers. Instead, realizing there are common interests and goals in rooting out bad actors and allowing good faith efforts to resolve deficiencies is the best strategy to help the consumer.

Fred N. Blitt, Esq., is a partner with Blitt and Gaines, PC in Illinois and Couch, Conville and Blitt in Louisiana. He is past president of NARCA. Contact: This email address is being protected from spambots. You need JavaScript enabled to view it..