Third Circuit Court Sanctions Attorneys for Manufacturing FDCPA Violations: What Credit Repair Companies Must Know

By Joeziel Joey Vazquez-Davila, CEO of CredlocityPublished: September 29, 2025

The Third Circuit Court of Appeals just handed down a precedential decision that every credit repair professional needs to read. In Sofaly v. Portfolio Recovery Associates, LLC, the court didn't just rule against two attorneys—it sanctioned them, dismissed their cases with prejudice, and ordered them to write apology letters. This case serves as a stark warning about the line between legitimate credit repair advocacy and manufacturing violations for profit.

As someone who's been in the credit repair industry for years, I'm writing this to break down what happened, why it matters, and what it means for how we all need to conduct business going forward.

The Case That Should Keep Unethical Operators Up at Night

What Actually Happened in Sofaly v. Portfolio Recovery Associates

In September 2025, the United States Court of Appeals for the Third Circuit affirmed sanctions against Joshua Ward and Travis Gordon, two attorneys who ran what the court called a "campaign of deception." The case numbers are 24-2639 and 24-2640, and it's precedential—meaning it sets binding legal standards for Pennsylvania, New Jersey, Delaware, and the Virgin Islands.

Here's the scheme they cooked up:

Ward and Gordon operated J.P. Ward & Associates, a debt-defense law firm. They wanted to scale up their practice and generate more attorney's fees from Fair Debt Collection Practices Act (FDCPA) cases. Under 15 U.S.C. §1692e(8), when a creditor reports a debt to credit bureaus, they must disclose if that debt is disputed. If they don't, consumers can sue for up to $1,000 in statutory damages plus attorney's fees.

The attorneys created a template for handwritten dispute letters. But these weren't normal dispute letters. They were deliberately designed to fail.

The "Designed to Fail" Strategy

The letters were filled with what the court called "gibberish"—rambling about "confusing times," how "difficult it was to stay on top of everything," and complaining that someone was trying to sell the writer a "crazy XR 65A80K thing" (apparently a television model). Buried somewhere in all that nonsense was a vague sentence: "I saw that your company is reporting that I owe you a sum of money, but I just don't think that is correct."

Why handwrite these incoherent letters? Ward and Gordon admitted their reasoning to the court. They theorized that debt collectors use software to process the flood of disputes they receive daily. They figured that clear, typed letters would get flagged and processed, but handwritten letters stuffed with irrelevant rambling would slip through the cracks. The goal wasn't to successfully dispute the debt—it was to have the dispute ignored so they could sue for FDCPA violations.

Here's where it gets worse: their paralegal was writing and signing these letters in the clients' names before ever speaking with those clients. They'd get a client to sign a general agency agreement, then manufacture these confusing letters, forge the client's signature, and send them off hoping for no response.

When Portfolio Recovery Associates didn't mark the debts as disputed (likely because the letters were incomprehensible), Ward and Gordon filed lawsuits on behalf of Robert Sofaly and Damien Malcolm. The complaints, verified under penalty of perjury, claimed that Sofaly and Malcolm had personally sent these letters. That was a lie.

How the Court Responded

The District Court Smelled Something Wrong

When Portfolio Recovery Associates removed both cases to federal court, U.S. District Judge Cathy Bissoon wasn't buying it. She ordered an evidentiary hearing "to explore the truth or fiction of [the] letters and the purpose behind them."

At the hearing, Ward and Gordon explained their whole operation. They admitted their staff was handwriting and signing the letters. The paralegal testified he'd written both letters before ever speaking with either client.

Judge Bissoon then ordered the attorneys to show cause why they shouldn't be sanctioned. When they failed to provide a satisfactory explanation, she:

• Dismissed both cases with prejudice under Federal Rule of Civil Procedure 11

• Awarded Portfolio Recovery attorney's fees and costs under the court's inherent authority

• Ordered the lawyers to write apology letters

• Required them to attach the sanction order to any future debt-dispute cases they filed in that district

Ward and Gordon appealed to the Third Circuit.

The Third Circuit Affirms: "Actions Have Consequences"

Writing for a unanimous panel, Circuit Judge Stephanos Bibas didn't mince words. The opinion opens with: "Courts depend on lawyers' honesty. Lies, misrepresentations, even half-truths corrode the rule of law."

The Third Circuit affirmed every sanction. Let me break down their reasoning because it's important for understanding what lines you cannot cross.

On Rule 11 Sanctions:

Rule 11 authorizes sanctions against lawyers who file pleadings for "improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation." The court found Ward and Gordon violated this rule through their misrepresentations and half-truths.

The complaints claimed Sofaly and Malcolm personally sent the letters. That wasn't true—the firm wrote, signed, and sent them. The court noted that the letters used "oddly specific" and "strange" details designed to confuse. The real goal wasn't to dispute debts but to manufacture §1692e violations and collect fees.

Ward and Gordon tried three defenses, and the court rejected all of them:

1. The Agency Defense: They argued that because clients signed agency agreements, the firm could act on their behalf. The court's response? "Agency law lets lawyers act for their clients, but it does not license deception." Having permission to act doesn't give you permission to lie.

2. The Pre-Litigation Defense: They claimed Rule 11 doesn't cover "pre-litigation correspondence." The court pointed out that under Federal Rule 10(c), when you attach a document to a complaint as an exhibit, it becomes part of the pleading "for all purposes." These letters weren't pre-litigation documents—they were incorporated into federal court filings.

3. The State Court Filing Defense: They noted they first filed in state court, beyond federal rules' reach. The court said they forfeited this argument by not raising it below. Plus, Rule 11 covers "later advocating" positions after removal to federal court, which Ward and Gordon did throughout the sanctions proceedings.

On Inherent Authority Sanctions:

Beyond Rule 11, the District Court used its inherent authority to award monetary sanctions (attorney's fees and costs). Federal courts have long-recognized inherent power to protect the integrity of their proceedings, including by sanctioning bad faith conduct and fraud on the court.

The court found Ward and Gordon "intentionally engineered a scheme to mislead Portfolio into violating the FDCPA—misleading the court into believing that the letters were legitimate attempts to dispute a debt in the process." Such conduct, the court wrote, "defiles the temple of justice."

The attorneys argued the conduct happened before litigation started, but the court explained that courts can sanction pre-litigation conduct "intended to improperly influence the judicial process." These letters were designed to manipulate both Portfolio and the court.

Judge Bibas concluded with this stinging rebuke: "Gordon and Ward used their clients to bring contrived lawsuits and make easy money. Even after the District Court sanctioned them and their firm, they still refuse to admit that they lied. Instead, they deflect blame, gesturing at 'mistakes' and 'imprecise drafting' to avoid accountability. We expect more from members of the bar."

Why This Case Matters for Credit Repair Companies

I'm writing this because I want everyone in our industry to understand what this case means. Credit repair is legitimate work. Millions of Americans have inaccurate, outdated, or unverifiable information on their credit reports that damages their financial lives. We help people exercise their rights under the Fair Credit Reporting Act and the Fair Debt Collection Practices Act.

But cases like Sofaly remind us that there's a right way and a wrong way to do this work.

The Red Lines You Cannot Cross

1. Don't Create Disputes Designed to Fail

The whole point of a dispute letter is to notify furnishers and credit bureaus of inaccurate information so they can investigate and correct it. If you're writing disputes that are deliberately confusing, vague, or incomprehensible with the goal of having them ignored so you can sue, you've crossed the line from advocacy to fraud.

Your job is to help clients succeed in getting inaccurate information corrected, not to manufacture technical violations.

2. Don't Misrepresent Who Created Correspondence

If your company writes a letter, don't claim the consumer wrote it themselves—especially if you're then verifying that claim under penalty of perjury in a lawsuit. The Sofaly attorneys had clients sign agency agreements, but they still got sanctioned because they misrepresented basic facts about who created the letters.

Be transparent. If you write letters as a representative of your clients, say so. Don't forge signatures or create the impression that your form letters were personally composed by consumers.

3. Don't Use Template Gibberish to Game the System

Those rambling, incoherent letters about TVs and "confusing times" weren't accidents—they were calculated to bypass debt collectors' processing systems. The court saw right through it.

Write clear, specific dispute letters that articulate the actual basis for disputing information. If an account is inaccurate, explain how. If information is unverifiable, say why. Use facts, not filler designed to confuse.

4. Remember Your Duty of Candor

Rule 11 imposes a duty of candor on all attorneys. But even if you're not a lawyer, you have ethical obligations when you're helping clients with credit disputes. Courts expect honesty from everyone who participates in the legal system.

When you file disputes with credit bureaus or send letters to furnishers, you're initiating a process that could end up in federal court. Everything you say should be truthful and accurate.

The Legitimate Way to Help Clients

So what should credit repair companies be doing instead? Here's how we approach things at Credlocity, and how I believe the industry should operate:

Start with a thorough review. Pull your client's credit reports and identify genuinely inaccurate, incomplete, or unverifiable information. Don't just dispute everything hoping something sticks.

Write specific, factual disputes. If a date is wrong, say what the correct date is. If an account doesn't belong to your client, explain why. If a creditor marked an account late when payments were actually on time, provide documentation.

Involve your clients meaningfully. They should understand what's being disputed and why. They should review correspondence before it goes out. They're not just names on agency agreements—they're real people trying to fix real problems.

Use the right FCRA and FDCPA provisions. There are legitimate grounds for disputing inaccurate credit reporting and challenging improper debt collection. You don't need to manufacture violations when there are real ones to address.

Document everything properly. Keep records of what information you're disputing, what evidence you have, what responses you receive. If you ever end up in court, you want a clear paper trail showing you acted in good faith.

Focus on results, not fees. Yes, we all need to make a living. But if your business model depends on creating technical violations rather than actually helping consumers, you're on the wrong path.

The Broader Context: Courts Are Watching

Sofaly isn't happening in a vacuum. Federal courts have been increasingly skeptical of what they perceive as manufactured FCRA and FDCPA litigation designed to generate attorney's fees rather than remedy actual consumer harm.

In recent years, we've seen:

• Courts adopting the "reasonable reader" standard in Bibbs v. Trans Union LLC (3d Cir. 2022) to assess whether credit report information is actually misleading when read in context

• Increased scrutiny of "professional plaintiffs" who file dozens or hundreds of FCRA cases

• Sanctions against attorneys who file frivolous or bad faith consumer protection claims

• Greater willingness by courts to award attorney's fees to defendants when plaintiffs' claims are clearly without merit

The message from the judiciary is clear: consumer protection laws serve important purposes, but they're not vehicles for generating fees through manufactured violations.

What This Means for FDCPA Section 1692e(8) Cases

The specific violation Ward and Gordon were pursuing—failure to mark a debt as disputed under §1692e(8)—is a legitimate cause of action. There are absolutely situations where consumers properly dispute debts and debt collectors fail to mark them as disputed with credit bureaus.

But after Sofaly, if you're bringing these cases in the Third Circuit (or frankly, anywhere), courts are going to scrutinize:

• Whether the dispute letter was clear and actually communicated a dispute

• Whether the consumer was genuinely involved in creating and sending the letter

• Whether the representations in your complaint about who wrote the letter are accurate

• Whether you designed your process to facilitate genuine dispute resolution or to manufacture violations

If you're doing legitimate work helping consumers with real disputes, you should be fine. If you're using the Sofaly playbook, expect sanctions.

Practical Steps to Protect Your Business

Based on this case, here's what I recommend for any credit repair company or attorney doing consumer protection work:

1. Review Your Dispute Letter Templates

Are they clear and specific? Do they actually explain what's inaccurate and why? Or are they filled with vague language and irrelevant filler? If your letters wouldn't pass the "would this make sense to a reasonable person?" test, rewrite them.

2. Implement Genuine Client Involvement

Before any letter goes out in a client's name, they should review and approve it. Document their approval. If you're writing on their behalf as their representative, make that relationship clear in your correspondence.

3. Train Your Staff on Ethical Standards

Everyone on your team needs to understand that accuracy and honesty aren't just nice-to-haves—they're legal requirements. No one should be signing clients' names without authorization or creating false impressions about who drafted letters.

4. Keep Detailed Records

Document your process. Keep copies of everything you send. Note when you spoke with clients and what they told you. If you're ever challenged on your practices, you want to be able to show good faith and reasonable procedures.

5. Focus on Substance Over Technical Violations

Are you helping clients because they have real problems with inaccurate credit reporting? Or are you looking for technical violations to exploit? The former is a sustainable business. The latter is what got Ward and Gordon sanctioned.

6. Stay Informed About Legal Developments

This case is binding precedent in the Third Circuit. But even if you operate elsewhere, it's instructive about how federal courts view manufactured litigation schemes. Subscribe to legal updates, read case law, join professional organizations that keep you informed.

The Reputation of Our Industry Is at Stake

Look, I'll be honest with you. The credit repair industry doesn't always have the best reputation. There are too many fly-by-night operators making promises they can't keep, charging upfront fees for minimal work, or using questionable tactics.

Cases like Sofaly make it harder for legitimate companies like ours to do our jobs. When attorneys manufacture violations and get sanctioned for it, it creates skepticism about the entire field of consumer credit advocacy.

We need to police ourselves. We need to call out bad practices and commit to doing things the right way. Because when we help people legitimately remove inaccurate information from their credit reports, we're providing real value. We're helping them qualify for mortgages, get better interest rates, pass employment background checks, and rebuild their financial lives.

That work matters. It's important. But it only works if we maintain credibility and trust—with consumers, with courts, and with the system as a whole.

Final Thoughts

The Third Circuit's decision in Sofaly is clear: shortcuts and schemes have consequences. Lying to courts, manufacturing violations, and using clients as pawns to generate fees will get you sanctioned. And rightfully so.

But here's what I want you to take away from this: if you're doing legitimate credit repair work—helping real people with real problems through honest means—you should sleep well at night. This case isn't about punishing consumer advocates. It's about punishing fraud.

At Credlocity, we've built our business on transparency, accuracy, and genuine client service. We dispute inaccurate information because it's inaccurate, not because we're trying to manufacture violations. We explain our process to clients and involve them in decisions. We keep meticulous records and stand behind our work.

That's the standard our industry should aspire to. And if this case makes some of the bad actors think twice about their practices, that's a good thing for all of us.

Stay ethical out there. The work we do matters too much to cut corners.

Case Citation

Sofaly v. Portfolio Recovery Associates, LLC, Nos. 24-2639 & 24-2640 (3d Cir. Sept. 22, 2025) (precedential opinion by Circuit Judge Bibas, joined by Montgomery-Reeves and Ambro, C.JJ.)

About the Author

Joeziel Joey Vazquez-Davila is the CEO and founder of Credlocity, a credit repair company dedicated to helping consumers correct inaccurate credit reporting through ethical, transparent practices. With years of experience in consumer credit advocacy, Joey is committed to raising professional standards in the credit repair industry.

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Legal Disclaimer

IMPORTANT: This blog post is provided for informational and educational purposes only. It does not constitute legal advice, and Credlocity is not a law firm. We are not attorneys, and nothing in this post should be construed as creating an attorney-client relationship or providing legal counsel.

The case discussed herein is a precedential decision from the United States Court of Appeals for the Third Circuit and represents binding legal authority within that circuit. However, the application of legal principles to any specific situation depends on the particular facts and circumstances of that case.

If you need legal advice regarding credit repair practices, FDCPA compliance, FCRA obligations, or any other legal matter, please consult with a licensed attorney in your jurisdiction. If you are facing sanctions or legal challenges related to your credit repair business or consumer advocacy work, seek immediate legal representation.

This blog post represents the author's opinions and analysis based on publicly available court documents and does not represent legal advice or guidance specific to any individual or entity's circumstances.

For educational purposes only. Not legal advice. Consult an attorney for legal guidance.