On May 7, 2018 a jury in the case of CFPB v. Weltman, Weinberg & Reis (WWR) reached a mixed verdict, but the judge decided to issue his own decision. Today he ruled in favor of WWR, and assessed costs to the plaintiff -- the CFPB.
You can read the Opinion here.
In April 2017 the CFPB filed suit against WWR, alleging that the firm deceived consumers with misleading calls and letters. A fundamental issue in the case is the fact that there is no formal definition of “meaningful review” of lawsuit documentation – 30 seconds? 5 minutes? 2 hours? The issue went to trial on April 30, 2018 and concluded a week later with the mixed jury verdict. U.S. District Court Judge Donald Nugent said he would take the verdict under advisement and write his own decision. He gave the CFPB until June 15 to submit arguments to the court, and then two additional weeks for WWR to have the last word. insideARM published this article by Shannon Miller of Maurice Wutscher, which is a summary of the WWR "last word."
The Judge's Decision
Among the Judge's findings that contributed to his decision:
- The demand letters sent by WWR accurately describe the identity and legal description of the entity sending the letter. As such, it cannot be fairly described as false or misleading simply for correctly identifying Weltman as a law firm, and as the signatory.
- The demand letter is sent on Weltman's letterhead, and accurately conveys the fact that Weltman is a law firm that has been retained to collect the putative debt. The letter does not state that an attorney has reviewed the particular circumstances of the account, does not mention any potential legal action, and is not signed by an attorney.
- A series of procedures is followed by WWR - involving attorneys - prior to sending demand letters, including obtaining information from creditor clients about consumer accounts, drafting client contracts, checking clients' reputation, discussing the specifics of each portfolio, evaluating client policies and procedures, obtaining warranties as to the validity of the debts, sampling documentation, and scrubbing the data to identify consumers who should not receive collection letters.
- WWR has a robust formal compliance program in place, developed and approved by attorneys, shareholders and the Board, and the firm conduts routine audits.
- Attorneys draft demand letter templates and work together with non-attorney staff on a daily basis as they conduct their work.
- There has never been a finding in any jurisdiction that WWR letters or any other statements contain falsehoods or misrepresentations.
- Despite requiring similar indications and disclosures of attorney invilvement in the debt collection letters used on behalf of the State of Ohio, Richard Cordray, when he became head of the CFPB, authorized this lawsuit against WWR for truthfully identifying themselves as a law firm.
- Plaintiff offered no evidence to show that any consumer was harmed by -- or that any consumer prioritized payments based on -- WWR's practice of identifying itself as a law firm.
As a result of these findings and others, Judge Nugent determined that the CFPB failed to prove its case.
The company published this statement following the decision:
Weltman, Weinberg & Reis Co., LPA (Weltman), is pleased to announce that the firm has prevailed in the lawsuit brought against it by the Consumer Financial Protection Bureau (CFPB). Judge Donald C. Nugent, presiding over the case in the U.S. District Court for the Northern District of Ohio, issued an Opinion - finding on Weltman’s behalf - and confirming that the CFPB’s lawsuit lacked merit. The Court emphasized its finding “that lawyers were meaningfully involved disproves the Plaintiff’s sole theory of liability, and precludes recovery under the Complaint.”
“The Judge’s Opinion thoroughly vindicates Weltman’s processes and is a complete rejection of the CFPB’s unfounded allegations,” said Weltman Managing Partner Scott S. Weltman. “The Judge stressed that the CFPB 'offered no evidence to show that any consumer was harmed by Weltman’s practice of identifying itself as a law firm in its demand letters,' that 'Weltman’s demand letters were truthful on their face,' and that 'Weltman attorneys were meaningfully and substantially involved in the debt collection process both before and after the issuance of the demand letters.'"
Continued Mr. Weltman, “Today’s Court Opinion is an affirmation of the confidence our law firm has maintained throughout the past three-and-a-half years in our operations and our employees. We would like to thank our valued clients for the their unwavering support, and we look forward to continuing to provide the same quality representation that has been a hallmark of our creditors’ rights firm for the past 88 years.”
The CFPB sued Weltman in April 2017 after the firm refused to be strong-armed into a Consent Order. This followed a Civil Investigative Demand (CID) process initiated by the CFPB in September 2014. Weltman engaged Jones Day to defend the lawsuit, which included a four-day trial in May 2018, and maintained that, as a law firm, it is legally allowed, under federal and state law, to provide collection and legal services, and that the Firm is being truthful with consumers and factually accurate when it uses its name and company letterhead for proper debt collection activity.
“We are grateful to Jim Wooley, Tracy Stratford, Ryan Doringo and the rest of our legal team at Jones Day for their hard work and tireless advocacy for our position. We are equally thankful for the outpouring of support from our colleagues in the collection and legal communities,” said Mr. Weltman.
Weltman, Weinberg & Reis Co., LPA has not been the subject of any other formal government actions or disciplinary reviews. The CFPB has had other recent losses at the federal trial court level, including Consumer Financial Protection Bureau v. Borders & Borders, PLC in July 2017, Consumer Financial Protection Bureau v. Universal Debt Solutions, LLC, et al. in August 2017, and the January 2018 rejection of the CFPB’s requests for both restitution and an injunction in Consumer Financial Protection Bureau v. CashCall. Additionally, as recently as June 2018, a federal judge deemed the CFPB’s structure unconstitutional, disqualifying it as a plaintiff in litigation against a New Jersey law firm (Consumer Financial Protection Bureau v. RD Legal Funding, LLC et al).
This is possibly the end of a CFPB chapter, in which the Bureau filed law suits against collection law firms, most concluding with consent orders which were criticized for being treated as rulemaking without the due administrative process.
The WWR case was the third filed by the CFPB under former Director Richard Cordray against debt collection law firms.
In June of 2014 the CFPB filed suit against the Georgia law firm of Frederick J. Hanna & Associates. That case was ultimately settled with a consent order announced in December of 2015. insideARM subsequently published an article by Joann Needleman that discussed the significance of the Hanna order and predicted continued oversight by the CFPB over the practice of law in the collection arena.
On April 26, 2016 the CFPB announced it had filed a consent order with the New Jersey debt collection law firm, Pressler & Pressler LLP. Pressler & Pressler issued its own press release about the order.
Both Pressler & Pressler and WWR insisted they had not violated any laws, and that they have been truthful with consumers.
These cases proceeded against the backdrop of the advancing Practice of Law Technical Clarification Act of 2018 (formerly of 2017). H.R. 5082 would amend the Fair Debt Collection Practices Act to exclude law firms and licensed attorneys who are engaged in activities related to legal proceedings from the definition of debt collector. Earlier this year the House Financial Services Committee completed markup of the bill and approved it to move on. insideARM wrote about the Act on March 19, 2018, just before it moved out of Committee. The legislation is still pending.