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Today’s Top Challenges for Financial Services Law Firms

Counsel's Corner - Steven Lindberg

Editor's note: This story originally appeared in the June issue of DS News.

Steven C. Lindberg practices in the areas of creditor's rights, foreclosure, and creditor bankruptcy law. He is a graduate of the University of Illinois and the John Marshall Law School. Lindberg serves as the Managing Partner for Anselmo Lindberg & Associates.

Lindberg is licensed in both Illinois and Florida. He is a member of the Illinois State Bar Association, the Florida Bar Association, DuPage County Bar Association, the USFN, and the ALFN. He spoke to DS News about the biggest challenges facing financial services law firms in 2018.

DS // What advice do you have for firms trying to manage costs in today’s foreclosure climate?

The natural inclination is to reduce support staff since that represents the largest expense that a law firm has. The problem is that when a firm reduces staffing, the metrics begin to suffer, and when this happens, the scorecards reflect this. This requires firms to up their game on technology so that the key metrics established by the clients are met. The idea is that your case management system and other technology integrations can provide the support that some of your staff previously provided, allowing the firm to jettison some staff. Technology and client requirements are always changing, and it does take time to initiate the necessary changes to put the firm in a position where staff can be decreased. This means that the firms will be expending additional sums of money during a period where reducing costs is crucial.

As firms try to whittle down staff, it becomes ever more important to make sure that staff is cross-trained. It is necessary to ensure that the product knowledge is spread throughout the organization, and this training takes time—time that could be given to file-level matters but time that is necessary to ensure the firm can continue to provide the service that the clients expect. This competes with the economic issues facing the firms.

Firms should have a financial plan on how to manage income and expenses. The cyclical nature of the business is something that all firms have to accommodate.

DS // Where should firms focus their efforts to remain competitive?

Expanding your business in a downturned market may take the form of seeking out additional default clients that you do not already have. This is somewhat problematic since all default firms are taking this same action. Servicers are going to be slow to onboard any new law firms when volume is low and the current firms are performing. To truly expand, it may mean practicing in a different area other than default.

A firm that is already handling default litigation has experience with discovery and pre-trial matters--so why not expand to handle commercial matters such as mechanics’ lien cases, construction matters, and regular contract cases? Another example is commercial real estate transactions. Default firms already handle matters involving title and REOs, so moving into handling commercial sales and purchases along with leasing makes sense. The challenge is that it will require time to set up systems and train staff.

DS // How can financial services law firms best work with servicers to help them overcome the challenges they are facing this year?

Rules that the CFPB put into effect in April are a challenge for both servicers and law firms. The issues surrounding periodic statements in bankruptcy are thorny, particularly during a Chapter 13 plan. The successors in interest rule will require not only the servicers but also the law firms to have policies and procedures in place to identify who is a successor in interest and then have processes set out to communicate with that successor. A misstep with either of these two major rule changes could subject the servicer or the firm to a potential suit by consumer law attorneys.

DS // How is your firm addressing these challenges?

We are retooling our technology to ensure enhancements for the future around CFPB requirements and streamlining workflow process to help with efficiencies and cost. We are working with our business partners to make sure our case management program can process the work with the transfer of data between our office to our clients seamlessly. This includes making sure all documents are automatically uploaded when completed, all required searches are done in accordance with client requirements and uploaded to the clients, and all steps are properly managed. We have dedicated several staff members and database persons to this project, and have included the rest of the staff in testing and providing suggested enhancements.

DS // Your firm currently has a case pending before the 7th Circuit, Holcomb v. Freedman Anselmo Lindberg. What precedents may this case set for the industry?

Holcomb v. Freedman Anselmo Lindberg deals with notice to attorneys who may be representing the borrower and may have implications for those in judicial states. Section 1692(c)a 2 of the Fair Debt Collection Practices Act (FDCPA) states that a debt collector may not communicate with a consumer if the debt collector knows that the consumer is represented by counsel unless allowed to do so by a court of competent jurisdiction. The issue is whether an attorney for a creditor knows that another attorney is representing the borrower and whether, under the rules set by the court, if the purported debtor attorney does not comply with the rules, is that attorney really representing the debtor?

In this case, an attorney appeared in a high-volume courtroom “on behalf” of the borrower but never formally filed his appearance in the case. A motion for default was sent with notice to both the attorney and the borrower. The borrower sued under the FDCPA alleging that notice should only have gone to the attorney. The law firm argued that since the attorney had not formally complied with the rules of the Supreme Court of Illinois, the attorney was not representing the borrower in the court case, that notice was properly sent to the borrower and as a courtesy to the attorney. The argument is that the court of competent jurisdiction, the Illinois Supreme Court, set forth rules which the other attorney failed to comply with and thus notice had to be sent to the consumer. The District Court ruled against the law firm and the case has been fully briefed, argued, and is set for a ruling in the 7th Circuit.

About Author: David Wharton

David Wharton, Editor-in-Chief at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has nearly 20 years' experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. He can be reached at [email protected].

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