As the volume of complaints the agency has handled swelled above 1.1 million, the Consumer Financial Protection Bureau filed a lawsuit in a federal district court this week against the debt collection law firm Weltman, Weinberg & Reis. The CFPB contends the firm has been falsely representing in millions of collection letters sent to consumers that attorneys were involved in collecting the debt.
The bureau also believes the law firm made statements on collection calls and sent collection letters creating the false impression that attorneys had meaningfully reviewed the consumer’s file, when no such review has occurred.
The CFPB is seeking to stop the unlawful practices and recoup compensation for consumers who have been harmed.
“Debt collectors who misrepresent that a lawyer was involved in reviewing a consumer’s account are implying a level of authority and professional judgement that is just not true,” said CFPB director Richard Cordray.
“Weltman, Weinberg & Reis masked millions of debt collection letters and phone calls with the professional standards associated with attorneys when attorneys were, in fact, not involved. Such illegal behavior will not be allowed in the debt collection market,” Cordray continued.
The suit arrives as debt collection continues to be the segment triggering the most complaints to the CFPB, which indicated it received more than 7,700 consumer issues stemming from these matters in February alone.
Cleveland-based Weltman, Weinberg & Reis regularly collects debt related to credit cards, installment loan contracts, mortgage loans and student loans, and has advised participants in the repossession space previously. The firm collects on debts nationwide but only files collection lawsuits in seven states: Illinois, Indiana, Kentucky, Michigan, New Jersey, Ohio and Pennsylvania.
Weltman, Weinberg & Reis issued what it called “a clear message” in response to the lawsuit filed against by the CFPB.
“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,” managing partner Scott Weltman said in a news release. “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,” Weltman continued.
The firm said it 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. Weltman, Weinberg & Reis insisted these actions were done at significant cost to the firm, 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.
Weltman, Weinberg & Reis acknowledged that it is not unusual for any large entity in the financial services industry to receive a CID from the CFPB. The firm, 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.
Weltman, Weinberg & Reis maintained that it 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,” Weltman said. “We will continue to vigorously defend WWR’s honest, ethical and compliant collection practices, and we look forward to our day in court.”
The CFPB alleged that the firm engaged in illegal debt collection practices. In form demand letters and during collection calls to consumers, bureau officials said the firm implied that lawyers had reviewed the veracity of a consumer’s debt. But typically, no attorney had reviewed any aspect of a consumer’s individual debt or accounts. No attorney had assessed any consumer-specific information. And no attorney had made any individual determination that the consumer owed the debt, that a specific letter should be sent to the consumer, that a consumer should receive a call, or that the account was a candidate for litigation.
The CFPB also alleged that the firm is violating the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Since at least July 21, 2011, the bureau said the law firm has sent millions of demand letters to consumers.
Specifically, the CFPB alleged that the law firm:
—Sent collection letters falsely implying they were from a lawyer: Weltman, Weinberg & Reis sent letters on formal law firm letterhead with the phrase “Attorneys at Law” at the top of the letter and stated the law firm’s name in the signature line. The letters also included a payment coupon indicating that payment should be sent to the firm. Some demand letters referred to possible “legal action” against consumers who did not make payments. Despite these representations, the vast majority of the time, no attorneys had reviewed consumer accounts or made any determination that the consumer owed the debt, that a specific letter should be sent to the consumer, or that the account was a candidate for litigation before these letters were sent.
—Called consumers and falsely implied a lawyer was involved: Weltman, Weinberg & Reis’s debt collectors told consumers during collection calls that they were calling from a law firm. Specifically, sometimes they told consumers that it was the “largest collection law firm in the United States,” or that the debt had been placed with “the collections branch of our law firm.” This implied that attorneys participated in the decision to make collection calls, but no attorney had reviewed consumer accounts before debt collectors called consumers.
The bureau is seeking to stop the alleged unlawful practices of Weltman, Weinberg & Reis. The bureau also requested that the court impose penalties on the company for its conduct and require that compensation be paid to consumers who have been harmed.
“The bureau’s complaint is not a finding or ruling that the defendant has actually violated the law,” officials said.
The full text of the complaint can be found here.
Complaint database update
As of March 1, the CFPB reported that it had handled approximately 1,136,000 complaints nationally. Some of the findings from the statistics from its latest snapshot report include:
—Complaint volume: For February, the CFPB found that debt collection was the most-complained-about financial product or service. Of the approximately 26,000 complaints handled in February, there were 7,755 complaints about debt collection.
The second most-complained-about consumer product was credit reporting, which accounted for 4,902 complaints. The third most-complained-about financial product or service was mortgages, accounting for 3,718 complaints.
—Product trends: In a year-to-year comparison examining the three-month time period of December to February, the bureau determined student loan complaints showed the greatest increase — 429 percent — of any product or service. The bureau received 551 student loan complaints between December 2015 and February 2016, while it received 2,913 complaints during the same time period a year later.
—State information: Montana, Georgia, and Missouri experienced the greatest year-to-year complaint volume increases from December 2016 to February 2017 versus the same time period 12 months before; with Montana up 53 percent, Georgia up 53 percent, and Missouri up 39 percent.
—Most-complained-about companies: The top three companies that received the most complaints from October through December 2016 were Equifax, TransUnion and Experian.