Two companies, one that buys debts and another that is a debt collector, are required to stop issuing deceptive debt collection lawsuits based on flimsy or nonexistent evidence, under orders by the U.S. Consumer Financial Protection Bureau issued Monday.
The debt collection law firm Pressler & Pressler, two principal partners, and New Century Financial Services, a debt buyer, filed lawsuits without determining if the debts are valid, the bureau said.
The orders also requires Pressler & Pressler, and its partners, to pay $1 million, and New Century to pay $1.5 million to the bureau’s Civil Penalty Fund.
“For years, Pressler & Pressler churned out one lawsuit after another to collect debts for New Century that were not verified and might not exist,” said Richard Cordray, director of the bureau. “Debt collectors that file lawsuits with no regard for their validity break the law and violate the public trust."
Pressler & Pressler collects consumers’ debts for creditors through lawsuits and other methods. New Century Financial Services buys and collects defaulted consumer debts and hands off those accounts to Pressler & Pressler for collection. To collect alleged debts on behalf of New Century and others, Pressler & Pressler filed hundreds of thousands of lawsuits against consumers.
The bureau found that Pressler & Pressler used an automated claim-preparation system and non-attorney support staff to determine which consumers to sue. Attorneys usually spent less than a few minutes, sometimes less than 30 seconds, reviewing each case before issuing a lawsuit. The process allowed the firm to generate and file hundreds of thousands of lawsuits against consumers in New Jersey, New York, and Pennsylvania between 2009 and 2014.
Under the bureau orders, Pressler & Pressler, the firm’s partners, and New Century Financial Services are required to stop filing lawsuits with false claims, make sure court filings are accurate, and pay civil penalties.
If you’re getting contacted by debt collectors for bills you don’t owe, see the Federal Trade Commission’s “Debt Collection” for recommendations on what to do.