A U.S. financial regulator could upend the business model of law firms that file waves of cookie-cutter lawsuits to collect money from people who haven't paid their bills, the Wall Street Journal reported yesterday. The U.S. Consumer Financial Protection Bureau last month filed its first lawsuit against a debt-collection firm, Marietta, Ga.-based Frederick J. Hanna & Associates, accusing it of violating federal consumer-protection laws. The suit could signal the regulator's intent to target similar high-volume law firms over allegations that debt-collection claims can be out of date, incorrect in their amounts, lacking in documentary support or overlapping with claims filed against the same debtors. The CFPB's case accused Hanna & Associates of churning out more than 350,000 credit card collection complaints against consumers, some of whom may in fact owe nothing or owe less than is claimed. Lawyers for the firm typically spend less than a minute reviewing each suit, the CFPB alleged. Roughly 77 million Americans have debt in collections, according to a recent study published by the Washington, D.C., think tank Urban Institute. The vast majority of borrowers sued in such cases don't appear in court, so many cases end in a default judgment allowing the collector to garnish wages, freeze bank accounts or put a lien on property.
