The Consumer Financial Protection Bureau has filed a lawsuit against the debt collection firm of Fredericak J. Hanna & Associates and its three principal owners “for operating a debt collection lawsuit mill that uses illegal tactics to intimidate consumers into paying debts they may not owe.” The CFPB complaint alleges that the Hanna firm files thousands of lawsuits that are based on faulty or unsubstantiated evidence.
According to CFPD Director Richard Cordray the Hanna firm is “taking advantage of consumer lack of legal expertise to intimidate them into paying debts they may not even owe. Today we are taking action to put a stop to these illegal debt collection practices.”
The CFPB alleges that the Hanna firm “operates like a factory” by producing hundreds of thousands of lawsuits without any meaningful attorney involvement against consumers who may not actually owe the debt. One attorney at the Hanna firm signed over 130,000 lawsuits in a two-year period which the CFPB says is misleading to consumers since no attorney could actually review that many lawsuits for accuracy.
The Hanna firm also systematically uses sworn statements (“affidavits”) from its clients attesting to the validity of the debts even though it is obvious that the signers could not possibly know if the information is correct.
The Hanna firm relies on deception and faulty evidence to drag customers to court and collect millions, . . . We believe they are taking advantage of consumer lack of legal expertise to intimidate them into paying debts they may not even owe. Today we are taking action to put a stop to these illegal debt collection practices.” Richard Cordray, Director of the CFPB.
Are these types of lawsuits filed in Nebraska? Absolutely, and it is common for these lawsuits mills to attach essentially worthless affidavits to the lawsuit or to offer such sworn statements in Summary Judgment motions. These sworn statements generally are signed by an employee of the debt buyer! The statements usually state something like this: “I know from my experience in reviewing such records and from common knowledge of how Credit Cards work that those records are made and maintained by individuals who have a business duty to make entries in the records accurately at or near the time of the event that they record.”
See the problem with this statement? The statement is not “I am the custodian of the credit card company’s business records.” Rather, the statement is “I know a guy who maintains these records.” To admit such statements into evidence as a Business Record exception to the Hearsay rule of evidence (See Nebraska Rule of Evidence 27-803(5)), the sworn statement must be made by a record keeper of the credit card company, not the debt buyer. But those statements are hard to get, so the debt buyers use these deceiving sworn statements to fool the Courts and the uneducated defendants that they have evidence of the debt when they really do not. This is the misleading practice the CFPB is calling out as deceptive, misleading and illegal.