Massachusetts Attorney General Announces Consent Agreement with Debt Collection Law Firm

At a press conference held today Massachusetts Attorney General Maura Healey announced that her office had entered into a Consent Order with the Waltham law firm of Lustig Glaser & Wilson, P.C. (LGW), and Ronald E. Lustig and Kenneth C. Wilson, individually.  The Consent Order brings to an end litigation brought in December, 2015 by the Attorney General’s office regarding the collection practices at the law firm. The press release from the Attorney General’s office can be found here.

A copy of the Joint Motion for Entry of Final Judgment by Consent may be found here.  

In consideration for the release of claims by the Commonwealth, LGW paid one million dollars ($1,000,000). No portion that payment shall be characterized or considered to be a penalty, fine or forfeiture.  

Many of the allegations brought by the Commonwealth and the much of the settlement impacts debt collection activity for debt buyers. The Consent agreement addresses the issues of proper identification of the consumer/debtor, account documentation, use of affidavits from a client, attorney review of files and “meaningful attorney involvement” will continue to be lightning rods for state or federal review of law firm collection practices. Litigation of accounts for debt buyers will require additional information and documentation. 

The agreement also imposes several additional restrictions regarding collection from consumers with exempt income. It imposes disclosure requirements in all communications with a consumer to help identify consumers with exempt income. The firm is also required to make oral disclosures in connection with potential exempt income.

The agreement also imposes certain obligations on LGW to cease collection activity if the consumer: 

1. has only exempt income and exempt assets; and
2. is either:
   1. handicapped (as defined by MA statute); or
   2. 70 years of age or older

Finally, the agreement addresses substantiation issues and litigation on time barred debt and requires certain future reporting to the Commonwealth. 

The LGW law firm issued its own press release today. From that press release:

“This agreement acknowledges that there are no findings of liability or wrongdoing on the part of LGW, no finding of harm caused to consumers and it does not impose any penalty on the firm. LGW felt it was in the firm’s best interest to end the expense and uncertainty of ongoing litigation. Throughout this process LGW cooperated fully and transparently, producing tens of thousands of pages of documents and answering all relevant questions.  LGW has a long track record of employing best practices in consumer and commercial debt collections. The agreement reflects existing policies and procedure that have been in place at LGW for a number of years, and outlines new provisions and practices not currently mandated by existing law or regulations, to ensure that the needs of certain consumer’s facing particular hardships can be fairly addressed, LGW is fully committed to adopting the new practices.” 

insideARM Perspective 

This case follows on the heels of two actions brought by the Consumer Financial Protection Bureau (CFPB) against the New Jersey collection law firm of Pressler & Pressler LLP and the Georgia law firm of Frederick J. Hanna & Associates.

insideARM wrote about the Pressler settlement on April 26, 2016 and wrote about the Hanna settlement on December 28, 2015. On April 29, 2016, Joann Needleman, Practice Group Leader at the Clark Hill PLC law firm, wrote an article discussing the challenges facing collection law firms. Even though the LGW Consent Order is with the Commonwealth of Massachusetts and not the CFPB, the issues identified in that story are still relevant after the LGW settlement.

The Consent Agreement is 38 pages. insideARM recommends that debt collection attorneys and compliance officers at debt collection law firms study the entire agreement for insight into potential problem areas for law firm collection practices in other state jurisdictions. You can be certain that other state regulatory bodies will be studying the document. 

Finally, it was clear from the press conference today that debt collection litigation on accounts for debt buyers was the hot button for the Attorney General. While Attorney General Healey acknowledged that debt buying is a legitimate business and litigation on purchased accounts is a legitimate method to collect delinquent accounts, the activity is clearly under the microscope in the Commonwealth of Massachusetts.