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Jury awards Over $25M in Texas AG Enforcement Action

Guest Authors

Lauren M. BurnetteMs. Burnette joins Barron & Newburger with a strong background in consumer credit litigation, compliance and appellate practice representing creditors, collection agencies, debt purchasers and law firms.

It is rare for an enforcement action against debt collectors to go to a contested trial, and a jury verdict is even rarer. On June 7, 2017, a Harris County, Texas jury awarded over $25 million in in civil penalties against a Houston debt buyer, its attorney, and his law firm for a variety of consumer protection law violations.  Among other things, the defendants were accused of repeatedly seeking judicial relief against consumers in courts far from the places where the consumers reside, in violation of the Texas Deceptive Trade Practices Act.

The jury found that each of the defendants had engaged in a false, misleading, or deceptive act or practice 898 times, awarding civil penalties of $6,286,000 against the debt buyer, $8,980,000 against the law firm, and $7,633,000 against the attorney.  The jury also found that the law firm failed to implement and maintain reasonable procedures to prevent the unlawful use or disclosure of sensitive personal information of 123 debtor-defendants,  for which conduct it awarded $1,230,000.

The jury also found that, on 63 occasions each of the defendant used threats, coercion, or attempts to coerce that employed the practice of threatening to take an action prohibited by law, or used a false representation or deceptive means to collect a debt, by collecting on a motor vehicle retail installment contract without a license issued under Chapter 348 of the Texas Finance Code. For this conduct, the jury awarded $346,500 against the debt buyer, $315,000 against the law firm, and $378,000 against the attorney.  Finally, the jury awarded $559,221.30 in attorney’s fees to the State through trial, and as much as $70,000 more should the defendants appeal.

The verdict was based solely on violations of Texas law.  However, the forum abuse allegations could just as easily have been brought by the CFPB or the FTC under Section 811 of the FDCPA which requires, with few exceptions, that suits be brought either in the county where the consumer resides, or whether the agreement giving rise to the debt was signed. The applicability of the FDCPA to the attorneys representing a debt buyer or creditor in collection actions is well-established.  Although the applicability of the FDCPA to debt buyers is an issue currently pending before the United States Supreme Court, current law treats them as debt collectors subject to liability under the Act.

While the size of the verdict is noteworthy, the AG’s win was not a surprise.  The topic of this particular debt buyer and its attorney, and allegations of forum abuse have been heard from members of the consumer bar for years.  Although comments from the “other side” should certainly be taken with a grain of salt, a consistent pattern of complaints from one’s adversaries is a warning that should be considered and investigated.  This case is a reminder of the need for creditors to audit the practices of their legal vendors and to investigate complaints against attorneys.  Apart from the monetary impact of the verdict, the media attention that the verdict has generated is the sort of reputational harm that responsible creditors try to avoid.