Debt Collection Agencies Forbidden From Auto-Suing Delinquent Borrowers

The CFPB has prevented debt collection agencies from filing automated lawsuits

Shaun Plum
MoneyTips Contributor

Debt Collection Borrowing

Debt Collection Agencies Forbidden From Auto-Suing Delinquent Borrowers
April 26, 2016

Debt collection agencies may no longer file automated lawsuits against borrowers who are behind on their payments, the Consumer Financial Protection Bureau (CFPB) declared on Monday, April 25. Along with this announcement, the bureau ordered law firm Pressler & Pressler, LLP and debt buyer New Century Financial Services, Inc. to cease their use of technology that automatically generated and filed lawsuits.

The CFPB went on to say that Pressler & Pressler had filed a number of different mass-produced lawsuits on behalf of New Century that were based on very little or no evidence. These lawsuits were created using a template and were doing little more than "battering" borrowers. CFPB Director Richard Cordray stated that such lawsuits "break the law and violate the public trust."

The lawsuits filed by the firm were allegedly created by a computer system used by untrained staff, not a lawyer, and that very little time was spent confirming the facts of the lawsuits before they were filed. The CFPB announced that using such machines to generate a high volume of lawsuits is a violation of the Dodd-Frank Act in several different ways. First, the law firm was making false allegations regarding consumer debt; second, they were filing lawsuits with wrong or bad information; and third, they were harassing borrowers with unsubstantiated legal action.

Pressler & Pressler may face between $1 million and $2.5 million in civil penalties, while New Century Financial may be fined as much as $1.5 million.

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Wanda Langley | 04.26.16 @ 21:06
I am sure that these Law Suits have affected some People's Credit Score's that should not have been affected. I hope that can be turned around for them.
$commenter.renderDisplayableName() | 12.04.20 @ 02:15