The Consumer Financial Protection Bureau (CFPB) has failed to prove its claims that consumers were harmed by a Cleveland-based debt collector’s practice of identifying itself as a law firm in demand letters, a federal judge ruled recently.
The CFPB initiated a Civil Investigative Demand (CID) process against Weltman, Weinberg & Reis Co., LPA in September 2014. The bureau filed a lawsuit in April 2017 after the firm refused to sign a consent order.
The case is Consumer Financial Protection Bureau v. Weltman, Weinberg & Reis Co. (U.S. District Court for the Northern District of Ohio, E.D., No. 17-CV-817).
After a four-day trial before U.S. District Court Judge Donald C. Nugent, the judge has released an opinion adopting an advisory jury’s finding that the company is legally allowed – as a law firm – to provide collection and legal services. In addition, Nugent ruled the firm is being truthful with consumers when it uses its name and company letterhead for debt collection activity.
“The judge’s opinion thoroughly vindicates Weltman’s processes and is a complete rejection of the CFPB’s unfounded allegations,” Scott Weltman, the firm’s managing partner, said in a news release.
The case went before an advisory jury in May on three counts. Count one alleged Weltman’s demand letters “misrepresented that the letters were from attorneys and that attorneys were meaningfully involved in preparing and sending the letters.” The other counts accused the company of violating the Consumer Financial Protection Act (CFPA).
“Although there was some evidence presented in support of the idea that the letters could be misleading to certain consumers, that evidence came exclusively from an expert that the court does not find credible,” Nugent said in his ruling.
The judge added that the evidence did not prove the demand letters violated the CFPA or Fair Debt Collection Practices Act (FDCPA).
The judge noted that Weltman is a legal professional association operating as a law firm, with a fully-integrated collection agency. The firm is owned exclusively by attorney shareholders, and employs non-attorneys in the debt collection units.
“Weltman sends out letters that are generated from attorney-created and attorney-approved templates,” Nugent wrote. “One of these templates is an initial demand letter printed on law firm letterhead, with the name of the firm appearing in all caps and in bold at the top with ‘ATTORNEYS AT LAW’ printed directly beneath. ‘Weltman, Weinberg & Reis Co., LPA’ is listed as the signatory on those letters.
“The demand letters accurately describe the identity and legal description of the entity sending the letter. As such, it cannot be fairly described as false or misleading simply for correctly identifying Weltman as a law firm, and as the signatory.
“The initial demand letter advises the putative debtor (1) that the debt has been placed with Weltman for collection and (2) that the consumer has specific rights under the FDCPA. These representations are both truthful.”
The judge added that the letter does not state an attorney has reviewed the particular circumstances of the account or mention any legal action.
The CFPB, under then-director Richard Cordray, offered no evidence to show any consumer was harmed by Weltman’s practice of identifying itself as a law firm in their demand letters, according to Nugent.
“Plaintiff offered no evidence to show that any consumer did or would be inclined to pay the amount sought in Weltman’s demand letters even if they did not owe the debt,” the judge wrote. “Plaintiff’s expert witness did not present credible evidence from which the fact finder could infer that any consumers were misled by Weltman’s demand letter. The expert testified that his research showed that 40 percent of the people who read the letter would think that a lawyer had ‘reviewed’ the account. His testimony also showed, however, that 20 percent of people thought a lawyer ‘reviewed’ the account even when no mention of a law firm, or attorney, was made in the letter.”
The CFPB did not prove Weltman’s letters were false, misleading or deceptive, he added.
“Weltman’s demand letters were truthful on their face,” the judge said in the opinion. “Weltman attorneys were meaningfully and substantially involved in the debt collection process both before and after the issuance of the demand letters.”
A CFPB spokesman declined to comment on the decision.