CFPB Claims Victory in Battle Against ‘Sketchy’ Debt Collection Suits

The CFPB says it has settled a lawsuit against a debt collection firm it accused of filing junk lawsuits against consumers.

Assuming a judge approves the settlement, the agreement would bar the firm Forster & Garbus from filing any new lawsuit against a consumer unless it has specific documents supporting the debt and certifies that an attorney reviewed those documents, the CFPB (Consumer Financial Protection Bureau) said Wednesday (Jan. 11).

In addition, the order would also require the firm to dismiss any pending lawsuit where it cannot meet these requirements, and pay a $100,000 penalty to the CFPB victim’s relief fund.

“Forster & Garbus bombarded its customers with sketchy lawsuits on behalf of big lenders like Discover and Citibank,” said CFPB Director Rohit Chopra. “The CFPB will be scrutinizing large financial companies that enlist debt collection outfits operating lawsuit mills.”

Among those companies are Discover and Citibank, the CFPB noted. The bureau sued Forester & Garber in 2019, alleging that the firm filed more than 99,000 debt collection lawsuits without the documents to back most of them up.

The CFPB suit also claimed the law firm “falsely represented to consumers that attorneys were meaningfully involved in preparing and filing the lawsuits,” in violation of the Fair Debt Collection Practices Act.

Reached for comment by PYMNTS, Forster & Garbus said it cooperated fully with the CFPB and provided “extensive” documentation to confirm its filing practices complied with the law.

“Forster & Garbus denied the allegations as set forth in the CFPB’s complaint,” the statement said. “Further, the CFPB’s complaint did not allege that any of the lawsuits filed by our firm were filed beyond the statute of limitations or filed in the wrong venue, thus CFPB’s statement that these lawsuits were illegal is simply not accurate.”

The proposed settlement comes as consumers’ debt load is on the rise, especially for those living paycheck to paycheck, as recent PYMNTS research has shown.

This year’s holiday shopping data shows that 45% of paycheck-to-paycheck consumers relied heavily on credit and financing to get Black Friday deals, paying for nearly 60% of their purchases with these methods.

Meanwhile, a recent report from the Urban Institute found that nearly 20% of adults between 18 and 24 with a credit file in the U.S. currently have debt in collections. In addition, the report said, young adults are particularly vulnerable to credit card, auto loan and retail delinquencies compared with older adults.