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Amerix Files Suit Against CESI Debt Solutions

A tipster (send in your tips here) brought to my attention a suit that was recently filed by the back office processor against the non-profit credit counseling agency, Consumer Education Services, Inc, aka CESI Debt Solutions.

According to the suit, the issue at hand is one of a contract dispute between the back office service provider, Amerix, and the non-profit group.

The introduction to the suit says:

This Complaint involves two distinct disputes. The first arises out of and concerns CESI’s attempt and ability to enforce a multi-state Attorneys General consent decree or consent judgment to which it was neither a party nor an intended beneficiary in an effort to avoid fulfilling their otherwise unambiguous and undisputed contractual obligations to Amerix. The second dispute arises out of the business relationship between CESI, a non-profit credit counseling agency (“CCA”), and Amerix, which, for approximately 12 years, has provided certain back office, marketing, and technological services to CESI (“Services”) pursuant to one or more written agreements that were negotiated at arm’s length and executed by both parties.

In exchange for Amerix’s provision of such Services, CESI agreed to pay Amerix various fees (“Fees”), including a portion of revenue received from clients (“Clients”) participating in debt management plans (“DMPs”) and a portion of revenue from creditors of those Clients. In negotiating the parties’ agreements, Amerix agreed to and did discount specific initial and interim fees including, without limitation, infrastructure-related and marketing fees that CESI would otherwise be required to pay in consideration of CESI’s agreement that upon expiration of the agreements, there would be a sufficient tail or run-off period during which Amerix continued to provide Services for existing Clients with active DMPs. This structure was established and agreed to by the parties so that Amerix would be able to recoup discounted upfront fees through the collection of backend service fees during a discrete runoff period for then existing DMP clients, or, if CESI insisted upon assuming all Services that Amerix was then providing to Clients, then CESI would make up the difference on the backend by paying Amerix a discretely calculable fee in connection with immediately terminating the relationship, which is expressed in the parties’ agreements as an early termination fee, because it relates to CESI insisting that Amerix “stop performing Services.” CESI has repeatedly agreed to this structure, both in entering into its agreements with Plaintiffs and in extending the agreements multiple times. CESI has enjoyed the benefits of the described agreements’ architecture, and Amerix has relied upon it while providing Services to CESI’s clients and organizing its own business.

Now, after entering into multiple short term extensions, ostensibly to provide an opportunity to negotiate a new long term agreement, and after significant and time-consuming negotiations to that end, CESI has communicated that due to Internal Revenue Service related concerns it wishes to allow the agreements to expire. Plaintiffs believe that CESI’s stated reasons for wanting the agreements to expire are false. Instead, Plaintiffs believe that discovery will show that CESI wishes for the parties’ relationship and related agreements to expire because CESI wishes to invest in expansion of its business model and, in connection with that change, to assume responsibility for provision of the Services that Amerix has historically provided to CESI’s Clients during each Client’s DMP plan period (“Effective Period(s)”). While pursued and articulated in a less than transparent manner, that decision is one that CESI is free to make. Amerix has not limited CESI’s ability to terminate any agreements and does not wish to take any action to limit CESI. However, CESI has taken the additional step of abandoning its contractual obligations and agreements in favor of pursuing its own business ends at Plaintiffs’ expense. Amerix cannot sit idly by while CESI seeks to take advantage of untruths, abuses its position and similarly abuses Amerix’s reliance upon CESI’s good faith and fair dealing.

Here, Plaintiffs allege causes of action for declaratory judgment, breach of contract, and unfair and deceptive trade practices against Defendant arising out of CESI’s attempts to avoid its contractual obligations, including some such breaches that involved unfair and deceptive behavior during the course of the relationship. Plaintiffs’ declaratory judgment claim relates to the scope, breadth and applicability of an arbitration provision contained in one of the parties’ agreements and to CESI’s standing to enforce an unrelated consent decree or consent judgment between Amerix and the Attorneys General of Maryland and North Carolina.1 This cause of action also seeks to have this Court adjudicate contract and tort claims brought by Amerix against CESI. Amerix’s breach of contract claim relates to: (1) CESI’s refusal to comply with unambiguous obligations to which it agreed, and which contemplate either continued Services and Fee collection by Amerix following expiration of the agreements between the parties during a tail or runoff period or, alternatively, payment of a discretely calculable backend payment to be made to Amerix in connection with the agreements’ expiration and CESI’s insistence that Amerix “stop providing Services” to Clients early; (2) CESI’s failure to reveal certain revenue that it received from CitiFinancial Network and CitiFinancial Retail Services (collectively, “CitiGroup”), the receipt of which triggered contractual revenue sharing obligations, and CESI’s related failure to make the required payments to Amerix; and (3) certain other breaches of contractual obligations that CESI owes in connection with the expiration of the business relationship and related losses that Plaintiffs will suffer. Amerix’s claim for unfair or deceptive acts or practices against CESI arises out of extra-contractual behavior related to CESI’s unfair and deceptive concealment from Amerix of certain revenues and fees that CESI received from creditors, a portion of which CESI was obligated to pay to Amerix in connection with its Services, and in connection with CESI’s conduct concerning the short term extension of the agreements and negotiation of an updated service agreement. – Source

Amerix Files Suit Against CESI Debt Solutions
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Roland Larson

    About a year ago, CESI suddenly cancelled payment to CITI Bank after a track record of 20 + months of direct payment to them from our bank.  The payments were never late or missing until about a year ago when CESI claimed that CITI Bank sent back a check.  Then (you guessed it right), CITI  Bank then claimed that we were in default of our low interest repayment contract through  CESI.  Now, we are forced to pay a higher rate of interest (from 5.99% to 23.99%). 

    In March 2012, CESI claimed that JUNIPER Bank (Barclays) had “dropped” us from their program.  This repayment agreement with CESI, JUNIPER and us, caused our low interest rate to go to a much higher rate.  We did NOT request any changes to be made with CITI Bank, JUNIPER (BARCLAYS Bank), nor with CESI.  This morning, CESI agent (“Joy”) admitted that CESI had initiated a new contract proposal with JUNIPER without our knowledge or consent—–which started this mess with JUNIPER in March 2012.
    Anyone with similar experiences with CESI (Care One Management)——we would appreciate any helpful information feedback. (stalker45_70@[email protected])

    • http://GetOutOfDebt.org Steve Rhode

      I saw your comment and contacted CareOne who does CESI’s backend. The head person there wants to personally look into your situation so I’m sending the email you have in your comment to her. Watch for an email from Jenny and keep me posted on what happens.

  • Former CESI employee

    I worked for CESI, I am not surprised by this lawsuit. 

    • J Williams

       Any news about the dispute between these two companies?

  • Jana

    this is so crazy!  i was a client of cesi but cancelled my account when i heard about all this shadiness!

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