Our industry has celebrated the opinion and order entered on July 25 in the infamous matter of the Consumer Finance Protection Bureau v. Weltman, et al as a major victory. The efforts and determination of Weltman’s team are extraordinary and were taken at great risk to themselves in order to vindicate the practices of collection firms nationwide. At its core, the Weltman case concerned the esoteric concept of “meaningful involvement.” This is akin to Aquinas’ discussion of angels on the head of a pin or Justice Stewart’s famous line, “I know it when I see it,” as his threshold test for obscenity. Today, while no one frets about elbow room for angels and the internet has rendered obscenity tests irrelevant, the issue of meaningful involvement looms daily.
Meaningful Involvement’s First Appearance
This phrase first appeared in 1993 in Clomon v. Jackson. In that case, the letter falsely stated that an attorney had personally reviewed it and determined litigation was feasible. Notwithstanding its limited factual application, it is now the de jure means for the consumers’ bar to sue collection firms.
Modernly, Bock v. Pressler & Pressler applied meaningful involvement to the complaint process. Even though not a single allegation in the collection complaint was found to be false, the court held a signature on the complaint implied meaningful and professional application of legal expertise. However, no guidelines as to how to demonstrate meaningful involvement were provided. All we could discern is that an attorney could not rely on actions taken by automation or non-attorneys to insulate themselves from liability.
Into this fray stepped the CFPB with its consent decrees against creditors, debt sellers and lawyers. However, the decrees had a silver lining: By setting documentary standards, we were informed of what was necessary to bring suit. So, a review of our scrubs, venue and documentation at placement and then, a second view at the time suit is filed should suffice to defeat a meaningful involvement case, right?
Cases at Odds
Hence, Weltman provides a template for how to defeat a meaningful involvement case on a demand letter, but it is not the anecdote to Pressler. In reality, we have two district court cases which seem to take opposite positions on the same processes. The Pressler court was dismissive of scrubs and non-attorney involvement whereas the Weltman court ruled attorney involvement in creating the processes, policies and procedures by which clients were accepted and demand letters were produced was sufficient, even if some were automated or performed by non-attorneys. Additionally, while the delicious circumstance that the CFPB’s former chairperson, Richard Cordray, the man who authorized the action against Weltman, had approved Weltman’s practices when he retained them to collect state debts as Ohio Attorney General added an element of satisfying drama to the matter, this was a unique circumstance that many of us will not have in our quiver.
Thus, Weltman addresses the sufficiency of a predemand letter review, not the process for approving a complaint. Additionally, as the trial court noted, “there is not necessarily a set meaningful involvement requirement… as this is a question of what must be determined based on individual facts and totality of circumstances in each case.” In other words, a meaningful involvement action is likely to survive a motion to dismiss which means, from a litigation and cost standpoint, you will be in it for the long haul, up to at least summary judgment, and likely a jury trial to vindicate your individual process.
Precedent and Progress Made
So, yes, meaningful involvement suits are not going away but this in no way discounts the Weltman ruling. First, it vindicates that attorney created and reviewed processes matter. Second, that collection firms can rely on attorney trained and supervised non-attorney staff to perform tasks, just like every other practice of law. Third, Weltman took a stand against the most powerful agency in American history and won, not on a technicality, but after jury and judge reviewed what they do and how they did it and found it meaningful. Finally, in taking this stand, Weltman sent a message to the consumer bar that it will not be easy to prove, even to a jury, that well-crafted and administered practices lead to misleading the consumer. Put differently, despite all the resources of a federal agency, the CFPB could not prove its case. As a result, this decision is a cautionary tale for the consumer bar – yes, the fight will be long and costly for the collection firm. But, with sufficient practices in place, a creditor will win.
Michael L. Starzec is a partner with Blitt and Gaines, P.C and is vicepresident of the Illinois Creditors Bar. He is a frequent speaker, writer and litigator on creditor’s rights.