The U.S. Consumer Financial Protection Bureau (CFPB) filed its first lawsuit against Frederick J. Hanna & Associates, a debt-collection firm, based in Marietta, GA. The firm is accused of violating federal consumer protection laws, processing more than 350,000 credit card collection complaints against consumers, some of whom may owe nothing or owed less than was claimed.
These collection practices are widespread. Roughly 77 million Americans have debt in collections, according to a recent study published by Urban Institute. CFPB officials say the regulator may sue law firms if they operate as debt-collection businesses rather than legal advisers.
The vast majority of borrowers sued in these cases do not appear in court and as a result, many of the cases end in a default judgment allowing the collector to garnish wages, freeze bank accounts or put a lien on property. These judgments can be difficult to correct.
CFPB officials are weighing regulations that would impose tougher requirements on debt collectors to establish they have the right to collect on a debt and ensure the amount is accurate. These rules would also impact banks and debt buyers as well.
Legal experts say the suit could signal the regulator’s intent to target similar high-volume law firms, and potentially banks and debt buyers, over allegations that debt collection claims can be out of date, incorrect in their amounts, lacking in documentary support or overlapping with claims filed against the same debtors.
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Related Resources:
http://online.wsj.com/articles/regulator-targets-legal-debt-collectors-1407105604