October 17, 2019

ABA Fights to Protect Courts’ Authority Over Litigation Attorneys

Urges CFPB to Reject Flawed “Meaningful Attorney Involvement” Concept

In the latest threat to the courts’ inherent authority to regulate and oversee the litigation activities of all attorneys appearing before them, the Consumer Financial Protection Bureau is seeking to codify the controversial “meaningful attorney involvement” concept that would impose special due diligence requirements just on creditor litigation attorneys.

Section 807(3) of the Fair Debt Collection Practices Act prohibits debt collectors from making a “false representation or implication that any individual is an attorney or that any communication is from an attorney.” This straightforward provision was designed to prohibit non-attorney debt collectors from impersonating actual attorneys by falsely claiming that they or their representatives are attorneys—or that their correspondence or court filings are from an attorney—when that is not the case.

Some courts have interpreted the term “from” to mean not just that a communication is from an actual attorney, but also that the attorney directly controlled the process through which the item was sent and that the attorney formed a professional judgment on the validity of the underlying debt. Because of this interpretation, many creditor attorneys are now routinely sued and can be forced to pay substantial damages, attorneys’ fees, and costs unless they can prove “meaningful attorney involvement” in the preparation of the demand letter or the actual law suit.

In its recent proposed Debt Collection Practices rule, the CFPB included a “safe harbor for meaningful attorney involvement” to protect creditor attorneys from liability under Section 807(3) if they can prove that they followed certain special due diligence steps before filing a lawsuit or motion with the court. However, those special steps are significantly different from the standard due diligence requirements in Federal Rule of Civil Procedure 11(b) that apply to all litigation attorneys appearing in federal court.

In September 18 comments to the CFPB, ABA President Judy Perry Martinez explained that while the ABA appreciates the Bureau’s efforts to create a safe harbor, we are concerned the proposal would harm many attorneys and law firms and should be withdrawn for several reasons.

First, the proposal would improperly codify the flawed “meaningful attorney involvement” concept, which is not mentioned in the FDCPA or other federal statutes. Because there is no statutory basis for imposing a special meaningful attorney involvement requirement on creditor litigation attorneys, it is up to the courts to regulate and establish professional standards for these attorneys and improper for the CFPB to issue new rules codifying or granting a safe harbor from the flawed concept.

Second, the safe harbor proposal would undermine the courts’ primary and inherent authority to regulate and sanction all attorneys engaged in litigation. Creating special due diligence requirements that only creditor litigation attorneys must follow establishes a double standard that is grossly unfair and undermines the courts’ authority to oversee the litigation activities of all attorneys appearing before them in a consistent, evenhanded manner.

Third, the proposal would undermine the attorney-client privilege, the work product doctrine, and the confidential attorney-client relationship. To claim the safe harbor, the attorney would have the burden of proving that the attorney drafted or reviewed the pleading or other paper in question and determined that the claims, defenses, and contentions were well-supported by existing law and evidence. But proving these enhanced requirements would force the attorney to disclose confidential communications with the client and a great deal of the attorneys’ work product.

The ABA is urging the CFPB to withdraw the safe harbor proposal and reject the meaningful attorney involvement concept. Protecting the courts’ primary authority to regulate, oversee, and sanction all attorneys engaged in litigation, regardless of the types of cases they file with the court, remains one of our highest priorities.

Follow us @ABAGrassroots to watch for developments involving the CFPB’s safe harbor proposal.