Forster & Garbus, LLP
Documents in this case
- Complaint · · 17 p.
- Stipulation · · 20 p.
Case summary
On May 17, 2019, the Bureau filed suit against Forster & Garbus, LLP, a debt-collection law firm based in Commack, New York. The Bureau alleged that from 2014 through 2016, fewer than a dozen attorneys at Forster & Garbus filed more than 99,000 debt-collection lawsuits, while having documents to support only a fraction of those debts. The Bureau alleged that these lawsuits were filed without meaningful attorney involvement, and thus the signatures of attorneys on these lawsuits violated the Fair Debt Collection Practices Act’s prohibition against the use of false, deceptive, or misleading representations or means to collect a debt and the Consumer Financial Protection Act of 2010’s prohibition against deceptive acts and practices. On January 18, 2023, the court entered a stipulated final judgment and order, which requires Forster & Garbus to possess specific documents supporting consumer debts and have an attorney review these documents before filing any new lawsuit, and to dismiss any pending lawsuit unless it certifies its compliance with these documentation and meaningful-attorney-involvement requirements. The order also requires Forster & Garbus to pay a civil money penalty of $100,000.
Complaint ()
PDF of this document (17 pages)
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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK BUREAU OF CONSUMER FINANCIAL PROTECTION, Plaintiff, v.
FORSTER & GARBUS, LLP, Defendant.
Civil Action No.
COMPLAINT Plaintiff, the Bureau of Consumer Financial Protection (Bureau), alleges as follows:
Introduction 1.
The Bureau brings this action against Forster & Garbus, LLP, a debtcollection law firm, to address its practice of filing collection lawsuits against consumers without meaningful attorney involvement. 2.
Since at least January 2014, Forster & Garbus has relied on nonattorney support staff, automation, and both a cursory and deficient review of account files to attempt to collect more than 99,000 debts that consumers allegedly owe to Forster & Garbus’s clients.
3.
Using high-volume litigation tactics, Forster & Garbus collects substantial sums of money from consumers who may not actually owe debts or may not owe debts in the amounts claimed in the collection suits. 2:19-cv-2928 Case 2:19-cv-02928 Document 1 Filed 05/17/19 Page 1 of 17 PageID #: 1
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Jurisdiction and Venue 4.
This Court has subject-matter jurisdiction over this action because it presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345.
5.
Venue is proper because Forster & Garbus is located, resides, and transacts business in this district. 12 U.S.C. § 5564(f). Parties 6.
The Bureau is an agency of the United States charged with regulating the offering and providing of consumer-financial products and services under federal consumer-financial laws, including the Fair Debt Collection Practices Act (FDCPA), 12 U.S.C. § 5491(a), and the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531, 5536(a)(1). The Bureau’s regulatory authority extends to persons engaged in the collection of debt related to any consumerfinancial product or service. 12 U.S.C. §§ 5481(5), (15)(A)(x). The Bureau has independent litigating authority to address violations of federal consumer-financial laws, including the FDCPA and the CFPA. 12 U.S.C. § 5564(a)-(b); 15 U.S.C. § 1692l(b)(6).
7.
Forster & Garbus is headquartered and maintains its principal place of business at 60 Motor Parkway, Commack, New York 11725. At all times material to this Complaint, Forster & Garbus has regularly collected or attempted to collect, Case 2:19-cv-02928 Document 1 Filed 05/17/19 Page 2 of 17 PageID #: 2
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directly or indirectly, consumer debts. Forster & Garbus is therefore a “covered person” under the CFPA and a “debt collector” under the FDCPA. 12 U.S.C. §§ 5481(6), (15)(A)(x); 15 U.S.C. § 1692a(6).
Facts 8.
For several decades, Forster & Garbus has collected debts incurred primarily for personal, family, or household purposes. Creditors and debt buyers refer credit-card, auto-loan, student-loan, and home-equity-loan debts, among others, to Forster & Garbus for collection.
9.
Between 2014 and 2016, at any given time, Forster & Garbus employed roughly ten or eleven attorneys, in addition to its two named partners. 10.
Since January 1, 2014, Forster & Garbus’s clients have placed more than 136,700 accounts with the firm for collection. 11.
Accounts placed with Forster & Garbus have generally been electronically sent to Forster & Garbus with the data needed to populate Forster & Garbus’s templates for communications with consumers, including templates for civil complaints. This data includes the consumer’s name, address, and socialsecurity number, the original account number, the date the account was opened, the name of the present creditor, the name of the original creditor, the date of chargeoff, the amount of the debt, and the last payment date. Case 2:19-cv-02928 Document 1 Filed 05/17/19 Page 3 of 17 PageID #: 3
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12.
Historically, unless a consumer disputes a debt, Forster & Garbus has generally not conducted any inquiry into the facts surrounding an alleged debt or requested supporting documentation, such as account applications, billing statements, payment histories, the terms and conditions governing an account, or consumer correspondence, from its clients to corroborate purported debts before filing suit. In addition, Forster & Garbus does not conduct reviews for contractual disclaimers related to debt sales, even though many of Forster & Garbus’s clients are debt buyers.
Forster & Garbus engages in mass litigation.
13.
Despite maintaining a small roster of attorneys, Forster & Garbus files suits in New York courts on a massive scale.
14.
In 2014, Forster & Garbus filed collection lawsuits on more than 45,600 consumer accounts; in 2015, it filed collection lawsuits on more than 34,100 consumer accounts; and in 2016, it filed collection lawsuits on more than 20,000 consumer accounts. Forster & Garbus filed more than 99,000 collection lawsuits between 2014 and 2016 (the “Collection Suits”). 15.
Forster & Garbus’s Collection Suits bore the names and signatures of attorneys despite those attorneys not being meaningfully involved in reviewing the merits of the lawsuits, including conducting any inquiry into the facts, or in preparing the pleadings.
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Forster & Garbus relies on non-attorney staff and automated processes to identify accounts for suit and to prepare relevant pleadings.
16.
Forster & Garbus relies on non-attorney staff and automated processes to identify accounts for potential legal action. Upon placement of an account with Forster & Garbus, the firm’s software automatically scrubs the file to determine, among other things, whether the relevant consumer has filed for bankruptcy, is in active military status, or is deceased. The software also assesses whether a statute of limitations bars collection.
17.
Non-attorney support staff then attempt to collect the debt for Forster & Garbus’s clients outside of the legal system. 18.
If the non-attorney personnel do not receive a response from a consumer to demands for payment or an account cannot otherwise be resolved, Forster & Garbus’s non-attorney personnel will identify the account as “suitworthy.”
19.
Accounts deemed “suit-worthy” are then, again, run against bankruptcy, deceased, and military databases. 20.
After these scrubs are run, files that are not rejected by one of the scrubs are transferred to one of Forster & Garbus’s partners, Mark Garbus, for review.
21.
Garbus uses two computer screens to compare a complaint related to a particular account, which Forster & Garbus’s software generates by populating a Case 2:19-cv-02928 Document 1 Filed 05/17/19 Page 5 of 17 PageID #: 5
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template with data provided by Forster & Garbus’s clients upon account placement, against information on the account, such as account balance and venue. Garbus reviews the information available on the account, any staff notes on the account, and, if available, any documents provided by clients upon account placement; historically, however, Forster & Garbus has not received any original or supporting documentation from its clients before filing suit. 22.
Garbus generally approves for suit more than 90% of the accounts that are presented to him. In his review, he looks for “obvious” reasons to reject a suit, such as a recent payment on the account or the consumer having filed for bankruptcy.
23.
Following Garbus’s review and approval, the complaint and summons are printed by the firm’s clerical unit and given to an associate attorney for further review and for signature. The associate attorney has the authority to reject the lawsuit.
24.
Forster & Garbus’s associate attorney conducts the same type of review as Garbus, examining the content included in the physical complaint against account data provided by the relevant client and any notes and available documents. The associate attorney may also review client affidavits to ensure consistency with the data in Forster & Garbus’s system. If the associate attorney approves the account for suit, he or she signs the complaint. Case 2:19-cv-02928 Document 1 Filed 05/17/19 Page 6 of 17 PageID #: 6
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25.
One former associate attorney with Forster & Garbus received and reviewed finished complaints from Forster & Garbus’s back office. If the information in the complaint accurately matched the client-supplied information in the firm’s computer system, he would sign the complaint. His review of each complaint only took “a minute or two,” and he would allocate roughly two minutes to reviewing a debtor’s file before approving and signing a complaint. 26.
For the majority of accounts placed by debt buyers and creditors with Forster & Garbus between 2014 and 2016, Forster & Garbus’s attorneys signed the complaints that initiated the Collection Suits without reviewing the following types of documentation in any form (electronically or otherwise) related to the purported debts: account applications, billing statements, copies of payments, payment histories, cash-advance check copies, the terms and conditions governing an account, and consumer correspondence.
27.
Forster & Garbus’s attorneys do not conduct reviews for warranties or disclaimers of warranties related to debt sales, and did not do so between 2014 and 2016. This means that debt buyers represented by Forster & Garbus may buy and seek to collect debts without any warranty that the debts are valid, accurate, or were owned by the seller. More broadly, this practice suggests that Forster & Garbus is generally unfamiliar with (and fails to conduct significant review of) its clients’ contracts.
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Forster & Garbus often files suit without investigating or otherwise verifying the facts it alleges.
28.
When electronic records are received from a client, Forster & Garbus historically has checked to make sure that the firm has certain pieces of information: (1) the consumer’s name, address, and social-security number; (2) name of the present creditor; (3) name of the original creditor; (4) original creditcard-account number; (5) date the account was opened; (6) date of charge off; and (7) account balance—information needed to complete a form complaint. Where supporting documentation has not been provided by one of its clients and a consumer has not requested substantiation of a debt, Forster & Garbus has generally not sought to investigate or otherwise verify information, such as the debt’s validity or accuracy, before filing suit. It has not sought payment histories, account applications, billing statements, copies of payments, cash-advance check copies, the terms and conditions governing an account, or consumer correspondence.
29.
In 2014, of the 45,621 accounts on which Forster & Garbus filed suit, Forster & Garbus possessed original or supporting documentation for only 8,958 of those accounts—19.6% of accounts.
30.
In 2015, of the 34,103 accounts on which Forster & Garbus filed suit, Forster & Garbus possessed original or supporting documentation for only 14,965 of those accounts—43.9% of accounts.
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31.
In 2016, of the 20,006 accounts on which Forster & Garbus filed suit, Forster & Garbus possessed original or supporting documentation for only 15,113 of those accounts—75.5% of accounts. In 2016, Forster & Garbus began to possess more original or supporting documentation for its accounts before filing suit because clients stopped referring accounts to Forster & Garbus until those clients were able to ensure the firm had sufficient information to permit the firm to sue and obtain judgments under the regulations of the Office of Court Administration. 32.
At least one former associate attorney with Forster & Garbus did not know, when he worked at Forster & Garbus, whether the information supplied by the firm’s clients was accurate, and he considered the issue outside of his purview. He also did not review any materials other than what he received from the client before signing a complaint. This attorney signed complaints for 41,508 accounts from January 1, 2014 through December 31, 2016.
33.
Forster & Garbus files debt-collection lawsuits on behalf of debt buyers, including: (1) many of the National Collegiate Student Loan Trusts; (2) Asset Acceptance, LLC; and (3) Midland Funding, LLC. 34.
Asset Acceptance, LLC and Midland Funding, LLC are subsidiaries of Encore Capital Group, Inc. Encore Capital Group, together with Midland Credit Management, Inc. and Asset Acceptance Capital Corp., is one of the nation’s largest debt buyers. In September 2015, Midland Funding (as well as Encore Case 2:19-cv-02928 Document 1 Filed 05/17/19 Page 9 of 17 PageID #: 9
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Capital Group, Midland Credit Management, and Asset Acceptance Capital Corp.) stipulated to a Bureau consent order that found that it had attempted to collect debts that it knew, or should have known, were inaccurate or could not legally be enforced based on contractual disclaimers, past practices of debt sellers, or consumer disputes.
35.
In September 2017, the Bureau took action against the 15 National Collegiate Student Loan Trusts and their debt collector, Transworld Systems, Inc., alleging that they sued consumers for private student-loan debt that the companies could not prove was owed or was too old to sue over. 36.
Despite filing lawsuits on behalf of debt buyers, including debt buyers that have been accused of unlawful debt-collection practices such as alleging that consumers owe amounts that they do not actually owe, Forster & Garbus does not conduct reviews for contractual disclaimers related to debt sales, nor did it request and review supporting documentation for many of the accounts on which it filed suit between January 1, 2014 and December 31, 2016. 37.
Forster & Garbus also files lawsuits on behalf of creditors that have been accused of unlawful debt-collection practices, including alleging that consumers owe amounts that they do not actually owe. For example, Forster files lawsuits on behalf of (1) Discover Bank; (2) Citibank, N.A.; and (3) Department Stores National Bank, an affiliate of Citibank, N.A. In July 2015, Discover and Case 2:19-cv-02928 Document 1 Filed 05/17/19 Page 10 of 17 PageID #: 10
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affiliated entities stipulated to a Bureau consent order that found that, among other violations, they had overstated the minimum amount due for certain borrowers by incorrectly including interest on loans that were still in deferment and were not required to be paid. The Bureau also found that Discover acquired a portfolio of defaulted debt from Citibank but failed to comply with the consumer notices required by federal law. Specifically, the Bureau found that the company failed to provide consumers with information about the amount and source of the debt and the consumer’s right to contest the debt’s validity. 38.
In February 2016, Citibank stipulated to a Bureau consent order that found that Citibank sold credit-card debt with inflated interest rates and failed to forward consumer payments promptly to debt buyers. The same day, Citibank, and other persons, including Department Stores National Bank, also stipulated to a Bureau consent order that found that they had falsified court documents filed in debt-collection cases in New Jersey state courts. 39.
Despite filing lawsuits on behalf of creditors that have been accused of unlawful debt-collection practices, including alleging that consumers owe amounts that they do not actually owe, Forster & Garbus has filed suits against purported debtors on behalf of those creditors without investigating or verifying the summary information that served as the basis for those lawsuits. Case 2:19-cv-02928 Document 1 Filed 05/17/19 Page 11 of 17 PageID #: 11
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40.
Forster & Garbus is generally not sufficiently familiar with its clients’ contracts and practices to reasonably rely on the limited summary information that its clients provide. For example, as noted above, Forster & Garbus’s attorneys do not conduct reviews for warranties or disclaimers of warranties related to debt sales, and they did not do so between 2014 and 2016. This means that debt buyers represented by Forster & Garbus may buy and seek to collect debts without any warranty that the debts are valid, accurate, or were owned by the seller, and Forster & Garbus would not know.
Forster & Garbus uses a few designated signers.
41.
Since 2014, Forster & Garbus has charged between one and five of its associate attorneys with the task of reviewing and signing the vast majority of complaints initiating the Collection Suits.
42.
Forster & Garbus also has those attorneys make court appearances on a regular basis; prepare motions and opposition papers and affidavits in support of those motions and oppositions; conduct discovery; respond to orders to show cause; prepare for trial; engage in settlement negotiations; and review and sign other legal documents related to judgments and collecting on judgments. 43.
Forster & Garbus’s associate attorneys generally work 40 to 45 hours a week and manage at least 450 to 500 files, although the designated signers may have fewer cases.
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44.
In 2014, Forster & Garbus filed collection suits on 45,621 accounts. A single associate attorney signed complaints for 41,498 of those accounts, in addition to handling other tasks, including frequent court appearances. 45.
In 2015, Forster & Garbus rotated four associate attorneys to serve as the primary signer of complaints at various periods during the year. That year, Forster & Garbus filed suit on 34,103 accounts. One associate attorney signed complaints for 14,586 of those accounts, another associate attorney signed complaints for 12,510 of those accounts, a third associate attorney signed complaints for 5,068 of those accounts, and the fourth associate attorney signed complaints for 1,927 of those accounts, in addition to handling other tasks, including frequent court appearances.
46.
In 2016, Forster & Garbus filed collection suits on 20,006 accounts. A single associate attorney signed complaints for 18,173 of those accounts, in addition to handling other tasks, including frequent court appearances. Count I Defendant’s Violations of the FDCPA (Filing Deceptive Collection Suits)
47.
The Bureau incorporates the allegations of paragraphs 1-46 of this Complaint.
48.
The Collection Suits featured the signatures of attorneys, but they were prepared and filed without meaningful attorney involvement. Case 2:19-cv-02928 Document 1 Filed 05/17/19 Page 13 of 17 PageID #: 13
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49.
Forster & Garbus falsely represented to consumers that the Collection Suits were from attorneys when, in fact, attorneys were not meaningfully involved in preparing or filing the suits.
50.
Section 807(3) and (10) of the FDCPA prohibits a debt collector from using any false, deceptive, or misleading representation or means to collect a debt, including the false representation or implication that any individual is an attorney or that any communication is from an attorney. 15 U.S.C. § 1692e(3), (10). 51.
Forster & Garbus’s acts and practices violate § 807(3) and 807(10) of the FDCPA, 15 U.S.C. § 1692e(3), (10).
Count II Defendant’s Violations of the CFPA (Filing Deceptive Collection Suits)
52.
The Bureau incorporates the allegations of paragraphs 1-46 of this Complaint.
53.
Section 1036(a)(1)(A) of the CFPA prohibits a covered person from committing any act or omission in violation of a federal consumer-financial law. 12 U.S.C. § 5536(a)(1)(A).
54.
Forster & Garbus’s FDCPA violations, described above in Count I, therefore constitute violations of § 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A).
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Count III Defendant’s Deceptive Acts and Practices in Violation of the CFPA (Filing Deceptive Collection Suits)
55.
The Bureau incorporates the allegations of paragraphs 1-46 of this Complaint.
56.
The complaints filed in the Collection Suits represented, directly or indirectly, expressly or by implication, that attorneys were meaningfully involved in preparing and filing the complaints.
57.
In fact, the complaints filed in the Collection Suits were prepared and filed without meaningful attorney involvement. 58.
Forster & Garbus’s material misrepresentations, as set forth above, were likely to mislead consumers acting reasonably under the circumstances. 59.
Sections 1031(a) and 1036(a)(1)(B) of the CFPA prohibit a covered person from engaging in any deceptive act or practice. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
60.
Forster & Garbus’s acts and practices constituted deceptive acts or practices in violation of §§ 1031(a) and 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).
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Demand for Relief
The Bureau requests that the Court:
a.
permanently enjoin Forster & Garbus from committing future violations of the FDCPA and CFPA;
b.
grant additional injunctive relief as the Court may determine to be just and proper;
c.
award damages or other monetary relief against Forster & Garbus; d.
order Forster & Garbus to pay redress or restitution to consumers harmed by its unlawful conduct;
e.
order Forster & Garbus to disgorge all ill-gotten gains; f.
impose civil money penalties on Forster & Garbus; g.
award costs against Forster & Garbus; and h.
award additional relief as the Court may determine to be just and proper.
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Respectfully Submitted,
KRISTEN A. DONOGHUE Enforcement Director
JEFFREY PAUL EHRLICH Deputy Enforcement Director
OWEN P. MARTIKAN Assistant Litigation Deputy
/s/Barry Reiferson
BARRY REIFERSON (NY Reg. #4343893) Enforcement Attorney
Bureau of Consumer Financial Protection 1700 G Street, NW Washington, DC 20552 Telephone: 212-328-7020 Facsimile: 202-435-5477 E-mail: [email protected]
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Stipulation ()
PDF of this document (20 pages)
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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK Bureau of Consumer Financial Protection, Plaintiff, v.
Forster & Garbus, LLP, Defendant.
Case No. 2:19-cv-2928 STIPULATED FINAL JUDGMENT AND ORDER The Bureau of Consumer Financial Protection (Bureau) commenced this civil action on May 17, 2019, to obtain injunctive and monetary relief and civil penalties from Forster & Garbus, LLP (Defendant). The Complaint alleges that, in connection with its debt-collection activities, Defendant violated § 807(3) and 807(10) of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692e(3), (10), and §§ 1031(a) and 1036(a) of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a), 5536(a)(1)(A).
The Bureau and Defendant agree to entry of this Stipulated Final Judgment and Order (Order), without adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint. (See Joint Mot. & Stip., ECF No. 59.) FILED CLERK
U.S. DISTRICT COURT EASTERN DISTRICT OF NEW YORK LONG ISLAND OFFICE 3:33 pm, Jan 18, 2023 Case 2:19-cv-02928-JS-ARL Document 60 Filed 01/18/23 Page 1 of 20 PageID #: 686
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FINDINGS 1.
This Court has jurisdiction over the parties and the subject matter of this action.
2.
Defendant neither admits nor denies the allegations in the Complaint, except as specified in this Order. For purposes of this Order, Defendant admits the facts necessary to establish the Court’s jurisdiction over it and the subject matter of this action. 3.
Defendant waives all rights to seek judicial review or otherwise challenge or contest the validity of this Order and any claim it may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each Party agrees to bear its own costs and expenses, including, without limitation, attorneys’ fees.
4.
Entry of this Order is in the public interest. DEFINITIONS 5.
The following definitions apply to this Order: a. “Charge-off” means the accounting action taken by a Creditor to remove a Debt from its financial statements by treating it as a loss or expense.
b. “Charge-off Balance” means the amount alleged due on a Debt at the time of Charge-off.
c. “Collection Suit” means any civil action commenced in any court or other tribunal by Defendant against a Consumer for the purpose of collecting any Debt.
d. “Consumer” means any natural person obligated or allegedly obligated to pay any Debt. 12 U.S.C. § 1692a(3). Case 2:19-cv-02928-JS-ARL Document 60 Filed 01/18/23 Page 2 of 20 PageID #: 687
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e. “Creditor” means the person that owned a Debt at the date of default giving rise to a cause of action. f. “Debt” means any obligation or alleged obligation of a Consumer to pay money arising out of a transaction in which the money, property, insurance, or services that are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment. 12 U.S.C. § 1692a(5). g. “Defendant” means Forster & Garbus, LLP, and its successors and assigns.
h. “Effective Date” means the date on which the Order is entered by the Court.
i. “Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or his or her delegate. j. “Originator” means the person, or that person’s successor in interest by way of merger, acquisition, or otherwise, who extended the credit creating a Debt. k. “Pending Collection Suit” means a Collection Suit that was filed prior to the Effective Date that is pending in court as of the Effective Date, including Collection Suits with Stipulations of Settlement where the parties have not entered a stipulation of discontinuance and the court has not entered a judgment pursuant to the terms of the settlement. l. “Related Consumer Action” means a private action by or on behalf of one or more consumers (not limited to Consumers, as defined) or an enforcement action by another Case 2:19-cv-02928-JS-ARL Document 60 Filed 01/18/23 Page 3 of 20 PageID #: 688
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governmental agency brought against Defendant based on substantially the same facts as described in the Complaint.
CONDUCT PROVISIONS I Prohibitions Related to Debt-Collection Litigation Activity IT IS ORDERED that:
6.
Defendant and its officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from: a. violating §§ 807(3) and 807(10) of the FDCPA, 15 U.S.C. §§ 1692e(3), 1692e(10), and §§ 1031(a) and 1036(a) of the CFPA, 12 U.S.C. §§ 5531(a), 5536(a); b. initiating or threatening to initiate a Collection Suit against any Consumer unless Defendant has performed the requirements described in Paragraphs 7 and 8; and c. moving for judgment in any Pending Collection Suit unless Defendant has performed the requirements described in Paragraphs 7 and 8.
Affirmative Requirements Related to Debt-Collection Litigation Activity 7.
With respect to each Collection Suit, Defendant must have in its possession the following:
a. if the Debt was from a revolving credit account: - - Case 2:19-cv-02928-JS-ARL Document 60 Filed 01/18/23 Page 4 of 20 PageID #: 689
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i. documentation that the Originator provided to the Consumer about the Debt that, at a minimum, accurately reflects:
1. the name of the Originator; and 2. the contractual terms and conditions applicable to the Debt;
ii. documentation (such as a charge off statement) that the Creditor or Creditor’s agent (such as a servicer) provided to the Consumer about the Debt that, at a minimum, accurately reflects:
1. the Consumer’s name, last known address, and the last four digits of the account number associated with the Debt at the date of Charge-off or default;
2. the name of the Creditor;
3. the date the Debt was Charged-off; and 4. the Charge-off Balance;
iii. the most recent monthly statement recording a purchase transaction, last payment, or balance transfer;
iv. a statement of the amount sought itemized by: 1. the total Charge-off Balance; 2. the total amount of interest accrued since Charge-off;
3. the total amount of non-interest charges or fees accrued since Charge-off; and Case 2:19-cv-02928-JS-ARL Document 60 Filed 01/18/23 Page 5 of 20 PageID #: 690
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4. the total amount of payments and credits made on the Debt since Charge-off;
b. if the Debt was not from a revolving credit account: i. documentation that the Originator provided to the Consumer about the Debt that, at a minimum, accurately reflects:
1. the name of the Originator;
2. the date the Debt was incurred; 3. the contractual terms and conditions applicable to the Debt; and 4. the Consumer’s signature evidencing the opening of the account or, if the account did not require the Consumer’s signature to be opened, a document, such as an invoice or billing statement, provided to the Consumer by the Originator demonstrating that the Debt was incurred by the Consumer;
ii. documentation that the Creditor or Creditor’s agent (such as a servicer) provided to the Consumer about the Debt that, at a minimum, accurately reflects: 1. the Consumer’s name, last known address, and the last four digits of the account number associated with the Debt at the date of Charge-off or default;
2. the name of the Creditor; and 3. the complete transaction history or itemization of the Debt prior to default, including all payments Case 2:19-cv-02928-JS-ARL Document 60 Filed 01/18/23 Page 6 of 20 PageID #: 691
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and credits and all interest, fees, and charges; and iii. a statement of the amount sought itemized by: 1. principal;
2. finance charge or charges;
3. fees imposed by the Originator;
4. collection costs;
5. attorney’s fees;
6. interest; and 7. any other fees and charges.
c. if the amount sought is higher than the Charge-off Balance or balance at the time of default, documentation that recovery of the higher amount is authorized by the agreement creating the Debt and any amendments thereto, and is permitted by law;
d. if the party on whose behalf Defendant is initiating a Collection Suit is not the Originator, documentation of the complete chain of assignment from the Originator to the party on whose behalf Defendant is initiating a Collection Suit, including each bill of sale or other document that effectuated a sale or assignment of the Debt, where each document effectuating a sale or assignment includes: i. the date on which the Debt was sold or assigned; ii. the name of the previous owner of the Debt and the name of the subsequent owner of the Debt; iii. the amount due at the time of the sale or assignment of the Debt; and Case 2:19-cv-02928-JS-ARL Document 60 Filed 01/18/23 Page 7 of 20 PageID #: 692
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iv. specific reference to the particular Debt being collected upon, which can be done with an exhibit attached to the bill of sale or other document effectuating the sale or assignment of the Debt that lists the particular Debt. 8.
Defendant must ensure that any attorney whose name will appear or has appeared on the complaint in any Collection Suit has: a. reviewed the documentation specified in Paragraph 7 and ensured that the complaint is consistent with that documentation;
b. logged into the Consumer’s account on Defendant’s computerized account management system or any other software that would create an electronic record that the attorney of record has accessed a Consumer’s file; c. confirmed based upon methods or means proven to be historically reliable and accurate that the statute of limitations has not run on the Consumer’s Debt; d. confirmed based upon methods or means proven to be historically reliable and accurate that the Consumer’s Debt was not discharged in bankruptcy or subject to a pending bankruptcy proceeding;
e. confirmed based upon methods or means proven to be historically reliable and accurate the Consumer’s correct identity and current address to determine the appropriate venue for a Collection Suit; and f. certified in writing or in Defendant’s computerized account management system, or any other software program that creates an electronic record, that the initiation of the Case 2:19-cv-02928-JS-ARL Document 60 Filed 01/18/23 Page 8 of 20 PageID #: 693
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Collection Suit complies with Paragraphs 7 and 8 of this Order.
9.
Defendant must ensure that each Pending Collection Suit complies with Paragraphs 7 and 8 by doing the following: a. Defendant cannot move for judgment in any Pending Collection Suit until it has certified its compliance with Paragraphs 7 and 8 for that Collection Suit; b. no later than 60 days after the Effective Date, if Defendant has not certified its compliance with Paragraphs 7 and 8 for a Pending Collection Suit where there has been no Stipulation of Settlement, Defendant must take reasonable measures to stay that Collection Suit; and c. no later than 120 days after the Effective Date, if Defendant has not certified its compliance with Paragraphs 7 and 8 for a Pending Collection Suit (including those Collection Suits with a Stipulation of Settlement), Defendant must file a motion to voluntarily dismiss that Collection Suit. Additional Conduct Provisions 10.
In moving for a default judgment in connection with a Collection Suit, Defendant must unless prohibited by law, including New York law, or court rule, tender to the court all the information and documentation that Defendant is required to have in its possession under this Order.
11.
In connection with Collection Suits, Defendant must maintain effective processes, systems, and controls to prohibit the assessment of fees, Case 2:19-cv-02928-JS-ARL Document 60 Filed 01/18/23 Page 9 of 20 PageID #: 694
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expenses, and other charges that are not in accordance with the contractual terms and conditions and applicable law.
MONETARY PROVISIONS VI Order to Pay Civil Money Penalty IT IS FURTHER ORDERED that:
12.
Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the Complaint, and taking into account Defendant’s inability to pay, Defendant must pay a civil money penalty of $100,000 to the Bureau.
13.
Within 10 days of the Effective Date, Defendant must pay $10,000 of the civil money penalty by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions. No later than March 1, 2023, Defendant must pay another $20,000 of the civil money penalty to the Bureau or the Bureau’s agent in compliance with the Bureau’s wiring instructions. No later than April 1, 2023, Defendant must pay another $10,000 of the civil money penalty to the Bureau or the Bureau’s agent in compliance with the Bureau’s wiring instructions. Every 30 days thereafter, Defendant must pay another $20,000 of the civil money penalty to the Bureau or the Bureau’s agent in compliance with the Bureau’s wiring instructions until the full amount of the civil money penalty has been paid.
14.
The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d).
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15.
Defendant must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds, Defendant may not: a. claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b. seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order. 16.
In the event of any default on Defendant’s obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become due and payable.
17.
Defendant relinquishes all dominion, control, and title to the funds paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to Defendant. 18.
The facts alleged in the Complaint will be taken as true and be given collateral estoppel effect, without further proof, in any proceeding based on the entry of the Order, or in any subsequent civil litigation by or on behalf of the Bureau, including in a proceeding to enforce its rights to any payment or monetary judgment under this Order. 19.
Under 31 U.S.C. § 7701, Defendant, unless it already has done so, must furnish to the Bureau its taxpayer-identification numbers, which Case 2:19-cv-02928-JS-ARL Document 60 Filed 01/18/23 Page 11 of 20 PageID #: 696
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may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.
20.
On the first day of each quarter, Defendant must notify the Enforcement Director in writing of the entry of any final judgment, order, or settlement in a Related Consumer Action during the preceding quarter. That notification must indicate the amount of redress, if any, that Defendant paid or is required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendant may not argue that Defendant is entitled to, nor may Defendant benefit by, any offset or reduction of any monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action or because of any payment that the Bureau makes from the Civil Penalty Fund. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against Defendant based on the civil money penalty paid in this action or based on any payment that the Bureau makes from the Civil Penalty Fund, Defendant must, within 30 days after entry of a final order granting such offset or reduction, notify the Bureau and pay the amount of the offset or reduction to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action. Effect of Misrepresentation or Omission Regarding Financial Condition 21.
The civil money penalty imposed in this Section is expressly premised on the truthfulness, accuracy, and completeness of Defendant’s Case 2:19-cv-02928-JS-ARL Document 60 Filed 01/18/23 Page 12 of 20 PageID #: 697
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sworn financial statements and supporting documents submitted to the Bureau on or about May 13, 2022, June 8, 2022, June 23, 2022, August 10, 2022, and September 19, 2022, which Defendant asserts are truthful, accurate, and complete, and which include: a. the tax returns and financial statements of Defendant Forster & Garbus, LLP, including the documents submitted to the Bureau on or about May 13, 2022 and September 19, 2022;
b. the sworn financial disclosure form for Defendant Forster & Garbus, LLP, including the attachments, signed on June 4, 2022, and submitted to the Bureau on or about June 8, 2022;
c. the tax returns and financial statements of Forster, Garbus, and Garbus, submitted to the Bureau on or about June 23, 2022, and d. the individual tax returns for Ron Forster and Mark Garbus, submitted to the Bureau on or about August 10, 2022. 22.
If upon motion by the Bureau, the Court determines that Defendant has failed to disclose any material asset or that any of its financial statements contain any material misrepresentation or omission, including materially misstating the value of any asset, then, by reason of the violations of law described in the Complaint, and taking into account the factors in 12 U.S.C. § 5565(c)(3), Defendant will be required to pay an additional civil money penalty of $3,000,000, which is the amount of the discount provided to account for Defendant’s inability to pay a greater amount in determining the civil money penalty imposed in this Section. Case 2:19-cv-02928-JS-ARL Document 60 Filed 01/18/23 Page 13 of 20 PageID #: 698
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Provided, however, that in all other respects this Order shall remain in full force and effect unless otherwise ordered by the Court; and, provided further, that proceedings instituted under this provision would be in addition to, and not in lieu of any other civil or criminal remedies as may be provided by law, including any other proceedings that the Bureau may initiate to enforce this Order.
COMPLIANCE PROVISIONS III Reporting Requirements IT IS FURTHER ORDERED that:
23.
Defendant must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to, a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the filing of any bankruptcy or insolvency proceeding by or against Defendant; or a change in Defendant’s name or address. Defendant must provide this notice, if practicable, at least 30 days before the development, but in any case no later than 14 days after the development.
24.
Within 7 days of the Effective Date, Defendant must: a. designate at least one telephone number and email, physical, and postal addresses as points of contact that the Bureau may use to communicate with Defendant;
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b. identify all businesses for which Defendant is the majority owner, or that Defendant directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email, and Internet addresses; and c. describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales.
25.
Defendant must report any change in the information required to be submitted under Paragraph 24 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner. 26.
Ninety (90) days after the Effective Date, and again one year after the Effective Date, Defendant must submit to the Enforcement Director an accurate written compliance progress report (Compliance Report) sworn to under penalty of perjury, which, at a minimum: a. lists each applicable paragraph and subparagraph of this Order and describes in detail the manner and form in which Defendant has complied with each such paragraph and subparagraph of this Order; and b. attaches a copy of each Order Acknowledgment obtained under Section IV, unless previously submitted to the Bureau.
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IV Order Distribution and Acknowledgment IT IS FURTHER ORDERED that:
27.
Within 7 days of the Effective Date, Defendant must submit to the Enforcement Director an acknowledgment of receipt of this Order, sworn under penalty of perjury.
28.
Within 30 days of the Effective Date, Defendant must deliver a copy of this Order to each of its executive officers, as well as to any managers, employees, service providers, or other agents and representatives who have responsibilities related to the subject matter of the Order.
29.
For 5 years from the Effective Date, Defendant must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section III, any future executive officers, as well as to any managers, employees, Service Providers, or other agents and representatives who will have responsibilities related to the subject matter of the Order before they assume their responsibilities. 30.
Defendant must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with the requirements of the E-Sign Act, 15 U.S.C. §§ 7001 et seq., within 30 days of delivery, from all persons receiving a copy of this Order under this Section.
31.
Within 90 days of the Effective Date, Defendant must provide the Bureau with a list of all persons and their titles to whom this Order was delivered through that date under Paragraphs 28 and 29 and a copy of all - - Case 2:19-cv-02928-JS-ARL Document 60 Filed 01/18/23 Page 16 of 20 PageID #: 701
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signed and dated statements acknowledging of receipt of this Order under Paragraph 30.
V Recordkeeping IT IS FURTHER ORDERED that:
32.
Defendant must create, for at least 5 years from the Effective Date, all documents and records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Bureau. Defendant must retain these documents for at least 5 years after creation and make them available to the Bureau upon the Bureau’s request. 33.
Defendant must retain:
a. all complaints initiating Collection Suits; b. all documentation and records specified in Paragraphs 7 and 8; and c. all consumer complaints or requests related to Collection Suits (whether received directly or indirectly, such as through a third party), and any responses to those complaints or requests.
Defendant must retain these materials for at least 5 years from the Effective Date or 5 years after filing of the respective Collection Suit, whichever is longer, and must make these materials available to the Bureau upon the Bureau’s request.
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VI Notices IT IS FURTHER ORDERED that:
34.
Unless otherwise directed in writing by the Bureau, Defendant must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. Forster & Garbus, Case No. 2:19-cv-2928,” and send them by overnight courier or first-class mail to the below address and contemporaneously by email to [email protected]: Assistant Director for Enforcement Consumer Financial Protection Bureau ATTENTION: Office of Enforcement 1700 G Street, N.W.
Washington D.C. 20552 VII Compliance Monitoring IT IS FURTHER ORDERED that:
35.
Within 14 days of receipt of a written request from the Bureau, Defendant must submit additional compliance reports or other requested information, which must be sworn under penalty of perjury; provide sworn testimony; or produce documents.
36.
Defendant must permit Bureau representatives to interview any employee or other person affiliated with Defendant who has agreed to such an interview regarding: (a) this matter; (b) anything related to or associated Case 2:19-cv-02928-JS-ARL Document 60 Filed 01/18/23 Page 18 of 20 PageID #: 703
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with the conduct described the Complaint; or (c) compliance with this Order. The person interviewed may have counsel present. 37.
Nothing in this Order will limit the Bureau’s lawful use of compulsory process, under 12 C.F.R. § 1080.6. VIII Transfer or Assignment of Operations IT IS FURTHER ORDERED that:
38.
Should Defendant seek to transfer or assign all or part of its operations that are subject to this Order, Defendant must, as a condition of sale, obtain the written agreement of the transferee or assignee to comply with all applicable provisions of this Order. IX Retention of Jurisdiction IT IS FURTHER ORDERED that:
39.
The consent motion to enter this final judgment is GRANTED. 40.
The Court will retain jurisdiction of this matter for the purpose of enforcing this Order.
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IT IS SO ORDERED.
DATED this 18th day of January, 2023. _________________________________ United States District Court Judge /s/ JOANNA SEYBERT Case 2:19-cv-02928-JS-ARL Document 60 Filed 01/18/23 Page 20 of 20 PageID #: 705