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Summary: A law firm and a debt-buying company were fined $2.5 million for running an alleged East coast lawsuit mill.
An alleged lawsuit mill in New Jersey has been slammed with a $2.5 million penalty. According to Consumerist, Pressler & Pressler LLP doled out hundreds of thousands of debt collection lawsuits over the years, but they never bothered to verify the validity before hounding the defendants. The Consumer Financial Protection Bureau announced on Monday that it had fined the law firm and its debt buying partner $2.5 million for mass-producing inaccurate collection lawsuits.
The CFPB penalized Pressler & Pressler, its two principals Sheldon Pressler and Gerald Felt, along with debt buyer New Century Financial Services Inc. They allege that the companies filed over 500,000 lawsuits against consumers in New Jersey, New York, and Pennsylvania after New Century bought the debts and passed off the accounts to Pressler & Pressler for collection.
After an investigation, the CFPB found the law firm used an automated claim-preparation system and non-attorney staff to determine which defendants to sue. In some cases, the debts were invalid or challenged, but New Century did nothing to verify the accuracy of these claims. Instead, all defaulted accounts were headed for collection.
The CFPB said that actual attorneys spent only mere minutes looking over the cases before filing the lawsuits. Director Richard Cordray of the CFPB said that “debt collectors that file lawsuits with no regard to their validity break the law.”
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Pressler & Pressler along with the partners must pay $1 million to the CFPB penalty fund, and New Century has been ordered to pay $1.5 million. Additionally, Pressler & Pressler must stop filing lawsuits without substantiated claims.
UPDATED 1:10PM
Pressler & Pressler released a response to the ruling, stating that they disagreed with the CFPB’s position.
“This settlement is not about laws or rules that are currently in place,” Sheldon Pressler said in a release. “Instead, the CFPB has formed its own unique interpretation of federal and state law today and applied those interpretations retroactively to our past practices that were, at the time, in accordance with federal and state laws.”
The release also stated that, “the industry has been grappling with how to comply with unestablished and ambiguous standards. Pressler and Pressler is interpreting this action by the CFPB as clarifying how it intends for firms in its field to operate going forward.”
Source: Consumerist
Photo courtesy of ABC News
