During the foreclosure crisis, a number of lenders, servicers, law firms, and others engaged in a practice where employees basically rubber-stamped thousands of foreclosure cases without reviewing any of the relevant details.
That practice came to be known as robo-signing.
Now, a new lawsuit from the Consumer Financial Protection Bureau sheds light on a similar practice that apparently exists within the debt collection industry – let’s call it “robo-suing.”
The CFPB on Friday filed suit against debt collection law firm Forster & Garbus, accusing the New York firm of filing thousands of debt collection lawsuits against borrowers despite allegedly conducting only superficial reviews of the relevant documents before deciding to sue.
According to the CFPB, creditors and debt buyers refer credit card, auto loan, student loan, home equity loan debts, and others to the firm for collection. Among the companies that have used Forster & Garbus are Citibank and Discover, according to the CFPB.
Since Jan. 1, 2014, Forster & Garbus’ clients have placed more than 136,700 accounts with the firm for collection.
According to the CFPB, during the time in question (2014 through 2016), Forster & Garbus employed approximately 10 or 11 attorneys, in addition to its two named partners.
Despite that small roster of attorneys, Forster & Garbus files suits in New York courts on a “massive scale,” the CFPB claims.
According to the CFPB, in 2014, Forster & Garbus filed collection lawsuits on more than 45,600 consumer accounts; in 2015, the firm filed collection lawsuits on more than 34,100 consumer accounts; and in 2016, it filed collection lawsuits on more than 20,000 consumer accounts.
In total, during those three years, the firm filed collection lawsuits against nearly 100,000 accounts.
But, according to the CFPB, in certain cases, the firm did not verify account details before suing. The bureau also claims that the firm’s attorneys often did not fully review the relevant details before signing off on a lawsuit.
“Forster & Garbus’s Collection Suits bore the names and signatures of attorneys despite those attorneys not being meaningfully involved in reviewing the merits of the lawsuits, including conducting any inquiry into the facts, or in preparing the pleadings,” the CFPB claims in its lawsuit.
The CFPB filing also provides a great deal more detail on Forster & Garbus’ collections process.
In many cases, the firm literally relies on software to review a borrower’s file to determine whether a borrower has filed for bankruptcy, is active military status, or is deceased. The software also reviews whether a statute of limitations prevents collections on that account.
Then, non-attorney staffers attempt to collect the debt.
If that is unsuccessful, the non-attorney personnel deem the file to be “suit-worthy.”
From there, the files are sent to Mark Garbus, one of Forster & Garbus’ partners, for review.
According to the CFPB, Garbus uses two computer screens to compare a computer-generated complaint that is auto-populated with information related to a particular account to the information on the account itself, such as account balance and venue.
From there, the CFPB claims that Garbus reviews the information available on the account, any staff notes on the account, and any documents provided by clients; although the CFPB notes that historically, Forster & Garbus has typically not received any original or supporting documentation from its clients before filing suit.
According to the CFPB, generally gives the green light to sue on more than 90% of the accounts he reviews.
The case was then given to an associate attorney to review and sign the lawsuit.
But according to the CFPB, the associate attorney’s review process is typically similar to Garbus’.
In fact, the CFPB claims that one of the firms former attorney’s review process consisted of spending only “a minute or two” on a consumer’s file, making sure the client-supplied information matched the complaint, before signing off on the lawsuit.
And this practice allegedly wasn’t isolated to one attorney.
“At least one former associate attorney with Forster & Garbus did not know, when he worked at Forster & Garbus, whether the information supplied by the firm’s clients was accurate, and he considered the issue outside of his purview,” the CFPB said in its complaint. “He also did not review any materials other than what he received from the client before signing a complaint.”
According to the CFPB, that one attorney approved lawsuits for 41,508 different accounts from Jan. 1, 2014 through Dec. 31, 2016.
Beyond that, the CFPB claims that the firm actually only used a handful of attorneys to sign the complaints it filed.
In 2014, Forster & Garbus filed collection suits on 45,621 accounts, the CFPB said. Of those, a single associate attorney signed complaints for 41,498 of the accounts.
According to the CFPB, in 2015, Forster & Garbus use four different associate attorneys to serve as the primary signer of complaints at various times during the year.
In that year, Forster & Garbus filed suit on 34,103 accounts. One associate attorney signed complaints for 14,586 of those accounts, another attorney signed complaints for 12,510 of those accounts, a third attorney signed complaints for 5,068 of those accounts, and the fourth attorney signed complaints for 1,927 of those accounts.
And in 2016, the firm filed collection suits on 20,006 accounts. According to the CFPB, a single attorney signed complaints for 18,173 of those accounts.
The bureau also claims that in most cases, the firm didn’t even have the original documentation verifying the details of the debt before pursuing legal action.
“For the majority of accounts placed by debt buyers and creditors with Forster & Garbus between 2014 and 2016, Forster & Garbus’s attorneys signed the complaints that initiated the Collection Suits without reviewing the following types of documentation in any form (electronically or otherwise) related to the purported debts: account applications, billing statements, copies of payments, payment histories, cash-advance check copies, the terms and conditions governing an account, and consumer correspondence,” the CFPB said in its complaint.
According to the CFPB, the firm possessed the original documentation less than 40% of the time before filing suit.
In 2014, the firm had the original documentation for only 19.6% of the accounts that eventually ended up in court.
The CFPB’s complaint alleges that “Forster & Garbus violated the Fair Debt Collection Practices Act by representing to consumers that attorneys were meaningfully involved in its lawsuits when, in fact, attorneys were not meaningfully involved in preparing or filing them.”
The CFPB also alleges that Forster & Garbus “violated the Consumer Financial Protection Act’s prohibition against deceptive acts and practices by making such representations to consumers through its lawsuits.”
The bureau is seeking an injunction against Forster & Garbus, plus damages, redress to consumers, disgorgement of ill-gotten gains, and the imposition of a civil money penalty.
To read the CFPB’s full complaint, click here.