CFPB Takes Action to Halt Debt Collection Mill From Bombarding Consumers with Junk Lawsuits
January 11, 2023 / Source: CFPB
Forster & Garbus illegally sued borrowers on behalf of Citibank and Discover, among others
WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) has reached a settlement in its lawsuit against law firm Forster & Garbus, LLP for illegal debt-collection practices. If approved by the court, the proposed settlement would prohibit Forster & Garbus from filing any new lawsuit against a consumer unless it has specific documents supporting the debt and certifies that an attorney reviewed those documents. The order would also require the company to dismiss any pending lawsuit where it cannot satisfy these requirements. Forster & Garbus would also be required to pay a penalty of $100,000, which would be deposited into the CFPB’s victims relief fund.
“Forster & Garbus bombarded its customers with sketchy lawsuits on behalf of big lenders like Discover and Citibank,” said CFPB Director Rohit Chopra. “The CFPB will be scrutinizing large financial companies that enlist debt collection outfits operating lawsuit mills.”
Forster & Garbus, LLP is a debt-collection law firm based in Commack, New York. Forster & Garbus had major clients including Discover and Citibank. Between 2014 and 2016, at any given time, Forster & Garbus employed roughly 10 or 11 attorneys, in addition to its two named partners. From January 1, 2014 to the filing of the complaint, Forster & Garbus’s clients placed more than 136,700 accounts with the firm for collection.
In 2019, the CFPB sued Forster & Garbus alleging that, from 2014 through 2016, fewer than a dozen attorneys at Forster & Garbus filed more than 99,000 debt-collection lawsuits, while having documents to support only a fraction of those 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.
Under the CFPA, the CFPB has the authority to take action against institutions violating consumer financial laws, including the FDCPA, which addresses unlawful debt collection practices. The CFPA prohibits engaging in unfair, deceptive, or abusive acts or practices.
If entered by the court, the order would require Forster & Garbus to:
- Retain specific documents supporting the debt before filing a debt-collection lawsuit: Forster & Garbus would be required to possess documents with specific information about the debt, including the name of the original creditor, evidence that the consumer authorized the debt, the chain of title supporting any sale of the debt, and a break-down of how the debt amount was calculated.
- Review documents supporting the debt before filing a debt-collection lawsuit: Forster & Garbus would be required to certify that an attorney whose name will appear on the complaint has reviewed the documentation supporting the debt and ensured that the complaint is consistent with that documentation.
- Dismiss certain debt-collection lawsuits: Forster & Garbus would be required to dismiss any pending lawsuit against a consumer if it does not certify its compliance with the specified documentation and meaningful attorney review requirements within 120 days of the court entering the order.
- Pay $100,000 in penalties: The order would require Forster & Garbus to pay a $100,000 penalty to the CFPB, which would be deposited into the CFPB’s victims relief fund.
Consumers can submit complaints about financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).
Employees of companies who they believe their company has violated federal consumer financial laws are encouraged to send information about what they know to [email protected].