CFPB v. WWR Debt Collection Law Firm Suit Goes to Trial

Just about a year ago the Consumer Financial Protection Bureau (CFPB) filed suit against the law firm of Weltman, Weinberg & Reis Co, L.P.A. (WWR) alleging that the firm deceived consumers with misleading calls and letters. The fundamental issue is the fact that there is no formal definition of “meaningful review” of lawsuit documentation – 30 seconds? 5 minutes? 2 hours? This issue is now going to trial.

Background

The CFPB’s lawsuit accuses WWR of falsely representing in millions of collection letters sent to consumers that attorneys were involved in collecting the debt. The Bureau argues that a “letter sent on law firm letterhead, standing alone, represents a level of attorney involvement to the debtor receiving the letter” and that consumers receiving these collection letters “may reasonably believe that an attorney has reviewed his file and has determined that he is a candidate for legal action.”

The Bureau further argues that WWR attorneys do not 1) review account-level documents, 2) make any individual determination that the balance stated is due and owing, 3) form a professional judgment that a demand letter is appropriate for a particular account, or 4) decide to send a demand letter to individual consumers.

WWR asserts that its “lawyers are involved in and oversee every step of the collection process; communicate with their clients to gather information that the lawyers feel, in their professional judgment, is necessary to evaluate a portfolio of debt and verify the accuracy of representations that the client makes; develop a collections strategy, and oversee the use of technology to identify accounts that should be treated differently, thereby satisfying the meaningful involvement standard.”

insideARM reported on the lawsuit in April 2017, and noted that this was the third debt collection law firm targeted for enforcement by the Bureau.

In June of 2014 the CFPB filed suit against the Georgia law firm of Frederick J. Hanna & Associates. That case was ultimately settled with a consent order announced in December of 2015. insideARM subsequently published an article by Joann Needleman that discussed the significance of the Hanna order and predicted continued oversight by the CFPB over the practice of law in the collection arena.

On April 26, 2016 the CFPB announced it had filed a consent order with the New Jersey debt collection law firm, Pressler & Pressler LLP. Pressler & Pressler issued its own press release about the order.

Both Pressler & Pressler and WWR have insisted they have not violated any laws, and that they have been truthful with consumers. WWR issued this statement in 2017,  

“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. 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.

WWR cooperated fully with the CFPB since it initiated its Civil Investigative Demand (CID) in September 2014, producing hundreds of thousands of pages of documents and more than 1 million collection phone call recordings, and submitting to two investigational hearings. This was done at significant cost to WWR, but with the goal of proving to federal regulators that its attention to compliance and its by-the-book ethical practice of law is exemplary.

It is not unusual for any large entity in the financial services industry to receive a CID from the CFPB. WWR, which has 65 attorneys and more than 650 employees, represents many of the largest financial institutions in the U.S. in bankruptcy, consumer and commercial collections, litigation, and real estate default matters. WWR has not been the subject of any other formal government actions or disciplinary reviews.

The result of the CFPB’s investigation of our law firm is based on its interpretation of the law, and not on any actual violation of federal or state laws or regulations as they are written today. We will continue to vigorously defend WWR’s honest, ethical and compliant collection practices, and we look forward to our day in court.”

Moving forward

The day in court is finally coming for WWR. Earlier this month, Judge Donald C. Nugent in the U.S. District Court for the Northern District of Ohio denied a Motion for Summary Judgment by WWR and sent the case to trial.

The company had filed its Motion citing 1) statutes of limitation applicable to the claims, 2) its communications with consumers truthfully identified WWR as a law firm as required under the FDCPA and the Ohio Rules of Professional Conduct, and 3) that the Bureau is not entitled to restitution or disgorgement damages based on the deposition testimony of a witness who stated, “I have no idea if it is all ill gotten or partly ill gotten.”

Judge Nugent concluded that no claim in this action will be completely foreclosed on statute of limitations grounds, and whether the communications at issue are misleading is a question of fact that must be determined by a jury. You can read the judge’s order here. The trial is set for May 1, 2018.

Some drama

A court filing last week revealed some drama regarding potential testimony in this case. WWR has indicated it will call former CFPB Director Richard Cordray as a witness in the case because 1) he was the Attorney General of Ohio in 2009 and 2010 when that office retained the firm to collect debts owed to the State of Ohio, and 2) as CFPB Director, he later authorized the filing of the lawsuit against WWR.

The CFPB moved the Court for a pre-trial ruling to exclude Cordray, claiming that evidence he could offer from the 2009-2010 period is not part of the period in question (the lawsuit specifically references letters sent after July 21, 2011), and therefore will confuse the jury, unfairly prejudice the Bureau, and waste time.

The CFPB also argues, “…that the Ohio Attorney General never identified any concerns with WWR’s collection practices or demand letters in 2009 or 2010 when Mr. Weinberg was special counsel likewise should be excluded,” and that “Mr. Cordray’s testimony and other evidence responsive to these lines of questions are protected from disclosure by the attorney-client privilege, the deliberative process privilege, and the attorney work product doctrine.”

You can read the full Motion, including additional arguments by the parties, here.

insideARM Perspective

This case proceeds against the backdrop of the advancing Practice of Law Technical Clarification Act of 2018 (formerly of 2017). H.R. 5082 amends the Fair Debt Collection Practices Act to exclude law firms and licensed attorneys who are engaged in activities related to legal proceedings from the definition of debt collector. Last month the House Financial Services Committee completed markup of the bill and approved it to move on. insideARM wrote about this Act on March 19, 2018, just before it moved out of Committee.