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CFPB Proposes Settlement on Debt Collection Lawsuit Documentation

The CFPB’s proposed settlement finds that the firm did not meet the standards for disclosing meaningful attorney involvement.

01/13/2023 12:00 P.M.

2 minute read

The Consumer Financial Protection Bureau announced a proposed settlement (PDF) with law firm Forster & Garbus LLP, which, if approved by the court, would require the firm to mitigate actions with its debt collection lawsuits filed on behalf of clients.

The settlement and enforcement action signal CFPB interest in the debt collection market, including work with debt collection law firms.

According to a news release from the CFPB, the settlement stems from a 2019 lawsuit from the bureau against Forster & Garbus. The firm had “major” clients, including Discover and Citibank, according to the bureau.

The CFPB alleged in the 2019 lawsuit that just a small number of attorneys at the firm filed more than 99,000 debt-collection lawsuits from 2014 through 2016 without documentation to support a majority of the debts.

“The CFPB further alleges that Forster & Garbus falsely represented to consumers that attorneys were meaningfully involved in preparing and filing the lawsuits, violating the Fair Debt Collection Practices Act’s (FDCPA) prohibition against collecting debts by using false, deceptive, or misleading representations and the Consumer Financial Protection Act’s (CFPA) prohibition against deceptive acts and practices,” according to the news release.

If entered by the U.S. District Court for the Eastern District of New York, the settlement would require Forster & Garbus, according to the CFPB, to:

  • Retain specific documents supporting the debt before filing a debt-collection lawsuit.
  • Review documents supporting the debt before filing a debt-collection lawsuit.
  • Dismiss certain debt-collection lawsuits.
  • Pay $100,000 in penalties that would be deposited into the CFPB’s Victim Relief Fund.

ACA’s Take

Member agencies should be following all CFPB enforcement activity to stay educated about trends and focus areas of the bureau. Debt collection law firms should review how the settlement may be an ongoing enforcement mechanism from the CFPB. ACA members should continue to work with reputable law firms that are working in compliance with federal and state requirements.

If you have executive leadership updates or other member news to share with ACA, contact our communications department at [email protected]. View our publications page for more information and our news submission guidelines here.

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