Weltman takes on the CFPB's Stance on Meaningful Involvement

This week the CFPB filed suit in the Northern District of Ohio against Weltman, Weinberg & Reis, an Ohio law firm.  The complaint is a continuation of the CFPB’s attack on collection law firms and their level of meaningful involvement.  Similar to its enforcement action against Works & Lentz, the CFPB’s attack in Weltman is focused on prelitigation collection efforts.

In its complaint CFPB alleges that the attorneys at Weltman were not meaningfully involved with the firm’s pre-suit demand letters and collection calls.   The CFPB takes issue with the following alleged practices:

• Attorneys had not reviewed the individual account information before sending demand letters or allowing its non-attorneys to make collection calls;
• The letters are generated through an automated process;
• The letters are on the firm’s letterhead and contain the firm’s name in type face in the signature line;
• The use of the following language when attorneys have not generally review the corresponding consumer’s account prior to sending the letter:
  • “Failure to resolve this matter may result in continued collection efforts against you or possible legal action by the current creditor to reduce this claim to judgment.”
  • “This law firm is a debt collector attempting to collect this debt for our client and any information obtained will be used for that purpose.”
  • “Please be advised that this law firm has been retained to collect the outstanding balance due on this account.”

As acknowledged by the CFPB, it views collection law firms as collection agencies not law firms at any time prior to an attorney reviewing the consumer’s account file and determining that the consumer owes the amount demanded.  This viewpoint is similar to what was reflected in the CFPB’s consent order with Works & Lentz in which the Consent Order required that, “in connection with the collection of a debt, if any attorney has not been meaningfully involved in reviewing the consumer’s account at issue and has not made a professional assessment of the debt”, the law firm may not:

• State or imply that a written communication in connection with the collection of a debt, including a demand letter, is from an attorney or on behalf of an attorney; 
• State or imply that a phone call in connection with collection of the debt is from or on behalf of an attorney; 
• Refer to “attorneys” or a “law firm” in any automated message that plays for consumers calling the firm regarding a debt; 
• State or imply an attorney has reviewed the account;  or
• State or imply that the firm may file suit or seek legal action.

Instead in those instances, the CFPB position is that the communications must include a disclaimer that no attorney has reviewed the account at issue and refrain from referring to the “law firm.”

As we have stated before, this approach is problematic on a number of levels.  First, the CFPB’s utter disdain for collection attorneys is apparent in its discussion of their contingent fee arrangements and concerns with use of the firm’s name in the automated recordings. To the point, by prohibiting the law firms from identifying themselves as such when there has not been meaningful attorney involvement with the account and no "professional assessment" has been made, the Consent Order effectively requires the law firm to violate 15 U.S.C. 1692e by not disclosing the true name of the debt collector. To counteract that concern, the Order makes it implicitly clear that attorneys will need to be meaningfully involved at the intake point forward and yet fails to clearly articulate what that means. Remember, that the Hanna Consent Order set the expectation that that Hanna have in hand account documentation before engaging in collection efforts, but did not require the law firm document their meaningful involvement except prior to filing suit. The current consent order suggests that is not enough.

 

The good news is that Weltman has decided to fight and its press release emphasizes that t Weltman fully cooperated with the CFPB’s two and a half year investigation and that the investigation failed to uncover any instance of consumer harm. 

 “We fundamentally disagree with the CFPB's allegations and believe that this lawsuit is the result of our firm's refusal to be strong-armed into a Consent Order," said WWR Managing Partner Scott Weltman. "We are a law firm that is legally allowed, under federal and state law, to provide collection and legal services. We are being truthful with consumers and factually accurate when we use our name and our company's letterhead for proper debt collection activity. WWR has taken every reasonable step to ensure that it collects on consumer debts in compliance with those statutes and to ensure that every statement made to consumers is accurate and not misleading. I'd also like to emphasize that the CFPB’s two-and-a-half-year investigation into our firm did not uncover a single instance of consumer harm.”

 

Collection law firms should closely monitor the Weltman litigation and continue to review their own practices.  For now, the CFPB’s position on meaningful attorney involvement requires meaningful attorney involvement to be documented from the time of intake through the closure of the file to prevent any undue attention from the CFPB.