As part of our continuing discussion of the CFPB’s proposed debt collection rules, we focus in this blog post on a provision that occupies very little real estate in the proposal, but could have tremendous significance: a new “safe harbor” provision relating to meaningful attorney involvement by debt collection law firms, contained in section 1006.18(g) of the proposed rules.
Now, you have seen the concept of meaningful attorney involvement play a prominent role in CFPB enforcement in the past few years. The Bureau entered into two consent orders with debt collection law firms, setting forth very specific requirements for the exact documents that must be in the law firm’s possession, the exact documents an attorney must review, and the legal issues the attorney must consider before sending a case to the courthouse to be filed. After that, the Bureau filed an enforcement action against yet another law firm, this one alleging a lack of meaningful attorney involvement in pre-suit collection letters sent by the firm. The case went to trial and resulted in a judgment for the law firm. And we are aware that the Bureau is still pursuing enforcement investigations related to meaningful attorney involvement.
Against this backdrop, it is interesting that the Bureau has now proposed a “safe harbor” for debt collection law firms in § 1006.18(g), explaining that the purpose of the proposed rule is “[t]o provide clarity for law firms and attorneys submitting pleadings, written motions, or other papers to courts in debt collection litigation.” The proposed rule would deem a lawyer to be “meaningfully involved” in filing documents in a debt collection lawsuit if the following standard is met:
[T]he attorney: (1) drafts or reviews the pleading, written motion, or other paper; and (2) personally reviews information supporting the submission and determines, to the best of the attorney’s knowledge, information, and belief, that, as applicable: the claims, defenses, and other legal contentions are warranted by existing law; the factual contentions have evidentiary support; and the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or lack of information.
Sound familiar? If so, that’s because this standard borrows heavily – and explicitly – from Rule 11 of the Federal Rules of Civil Procedure. In doing so, however, it represents a significant departure from the standards set forth in the Bureau’s previous consent orders. Those consent orders, as noted above, contained highly specific requirements for the exact documents an attorney must review, and the precise legal determinations that need to be made, before a lawsuit is filed. Nothing like this appears in proposed § 1006.18(g). Rather, an attorney enjoys a “safe harbor” merely by reviewing the pleading and reviewing “information supporting the submission” to support a determination that the claims are warranted by existing law and that there is evidentiary support for the factual assertions in the pleading.
We welcome this simplification of the meaningful involvement standard. It establishes a clear, well-settled rule for an attorney’s conduct, and hopefully will remove the Bureau from the business of micro-managing attorneys’ representation of their clients in an area where the Bureau has never established any consumer harm. But one big question remains. Meaningful attorney involvement claims originated with pre-suit letters but the proposed “safe harbor” only applies to litigation submissions. So what is the standard for pre-suit letters? It would be helpful for the Bureau to provide the same desirable clarity for those letters that it has proposed for litigation submissions, and we urge the Bureau to address this issue in the proposed rules. In line with existing FDCPA precedent, the Bureau should recognize that a letter can include language stating that an attorney has not reviewed the file, or has not made any determination that a suit should be brought, and thereby avail itself of a similar “safe harbor” for sending letters.