Judge Issues Final Ruling In CFPB V. WWR

Judge Issues Final Ruling In CFPB V. WWR
by Jessica Lamoreux

Judge Nugent issued his final ruling in Consumer Financial Protection Bureau v. Weltman, Weinberg, & Reis Co., LPA on July 25, 2018. This decision was a big win for Weltman and the creditors’ bar generally. In this case, the Consumer Financial Protection Bureau (“CFPB”) argued that Weltman violated the Fair Debt Collection Practices Act (“FDCPA”) by sending letters to debtors on its letterhead, under the theory that the letters constituted an implicit representation that an attorney had been meaningfully involved in the file, when in fact no attorney had been so involved. The Court held that Weltman did not violate the FDCPA in sending demand letters on its letterhead because attorneys were meaningfully involved in the handling of the files on which letters were sent.

This case is important because the Court offered an expanded view of what constitutes “meaningful attorney involvement.” The meaningful attorney involvement issue arises from the assertion, which has been accepted by numerous district and circuit courts, that the very fact that a letter is from a law firm would lead some debtors to believe that an attorney reviewed their file and is potentially prepared to file suit, i.e., that an attorney was meaningfully involved with the file prior to sending the letter. When an attorney was not actually meaningfully involved, this could lead some debtors to overestimate the risk of not paying the debt and consequently prioritize payment more than they would if they knew that no attorney was actually involved prior to sending the letter.

In prior cases on this issue, both the CFPB and the courts have focused on a specific attorney’s time spent reviewing the specific file of the debtor that received the letter at issue. In this case, however, the Court took a more expansive view of “attorney involvement” and instead considered a variety of ways in which attorneys might be involved in the handling of files. Specifically, the Court considered the extent to which attorneys were involved in drafting letter templates, training non-attorney staff on “red flags” that should trigger more in-depth attorney review, designing audit and oversight programs for non-attorneys, implementing hard controls to prevent error, selecting “scrubbing” processes to catch problematic files, and drafting policies and procedures for all firm processes. Essentially, the court held that “attorney involvement” does not require involvement in a particular file, but rather involvement in the overall management of the debt collection process to ensure that legal requirements are met.

In its written opinion, the Court also emphasized that the CFPB had provided no evidence that a single specific debtor was actually harmed or misled by Weltman’s letter. This indicates that the Court is not willing to accept as compelling evidence the statistical data that the CFPB has regularly relied on in its arguments. The Court stated that it found that the CFPB’s expert witness was not credible and, in an interesting aside, noted that the witness testified he was “meaningfully involved” in the research related to his testimony despite the fact that much of the work had been delegated to staff whom he instructed and supervised.

Those in the debt-collection industry have long contended that the meaningful involvement standard missed the mark by ignoring many types of indirect yet important attorney involvement and instead insisting that attorneys spend time conducting an individual review of each and every file, when in reality, such a review contains many elements that may effectively be delegated to non-attorney staff or even automated. Firms have also argued that the CFPB’s reliance on statistical data is misplaced and not in keeping with the basic structure of the American legal system, which requires a showing of actual injury to a specified individual rather than statistical evidence of the likelihood of an injury to an unidentified person. With the decision in the Weltman case, they now have precedent to support those arguments. This is a big win for debt collection firms.

The court’s full opinion can be found here: https://assets.documentcloud.org/documents/4618955/WWR-Ruling.pdf