Suit alleges illegal fees sought from debt relief law firms, attorneys

Law firms and individual attorneys offering debt relief services were sued today by the CFPB for collaborating to allegedly charge “illegal fees” to consumers seeking debt relief, the consumer agency announced today.

The suit filed today seeks, CFPB said in a statement, to stop the defendants’ unlawful scheme, obtain relief for harmed consumers, and impose penalties. The penalties being sought were not detailed in the statement.

The suit alleges that three law firms (Howard Law, P.C. and Williamson & Howard, LLP, both of Orange County, Calif.; and the Williamson Law Firm, LLC, registered in Kansas) and two attorneys (Vincent Howard and Lawrence Williamson) operated a debt relief operation with another firm, Morgan Drexem, Inc. That firm, CFPB said, “shut down” in 2015 following the agency’s lawsuit against.

“The defendants exploited consumers who were already suffering financial difficulties by tricking them into paying steep, illegal fees,” said CFPB Director Richard Cordray. “We put a stop to this scam once already, and we intend to do it again.”

CFPB said its complaint alleges that the defendants violated the Telemarketing Sales Rule by collecting illegal fees and deceiving consumers about being charged upfront fees. Consumers seeking debt relief help from the attorneys in this case were given two contracts, one for debt settlement services and the other for bankruptcy-related services. The CFPB alleges that consumers who signed up sought services only for debt relief and not bankruptcy. The contract given to consumers related to bankruptcy was a ruse to disguise illegal upfront fees. The CFPB alleges that the attorneys collected “tens of millions of dollars in unlawful fees this way from consumers, and often failed to settle any debts.”

The CFPB said the defendants also assisted illegal debt relief practices by Morgan Drexen, Inc. and its president and chief executive officer, Walter Ledda. In 2015, the CFPB secured a judgment against Ledda for participating in the unlawful debt relief operation, the bureau said. In 2016, the CFPB secured a judgment against Morgan Drexen for the same conduct. “The attorneys named in today’s case had worked alongside Morgan Drexen and Ledda to collect illegal fees, and then took over the operation after the CFPB halted Morgan Drexen’s and Ledda’s illegal activities,” the CFPB stated.

CFPB Sues Debt Relief Attorneys for Collecting Illegal Fees from Struggling Consumers