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Reader Wants to Know What’s Up With NoteWorld Lawsuit

A reader sent in a comment, “I have been following the Noteworld class action suit from afar. Are you aware of a settlement in this case? Thanks for all the good work you do out there and your help with this is much appreciated.”

I have not checked on the case in a while, so here is an update on current open federal court cases.

Lloyds London v. NoteWorld – Filed May 25, 2011

Summary from complaint:

On information and belief, NoteWorld is in the business of payment servicing, consisting of, among other things, collecting, processing and disbursing payments on behalf of customers and debt reduction companies.

Underwriters seek to rescind Professional Services Liability Policy Certificate No. SUA 12139, issued to NoteWorld effective November 30, 2009 (the “Policy”), because NoteWorld induced Underwriters to issue the Policy by misrepresenting and concealing the existence of numerous lawsuits that had been filed against NoteWorld LLC and/or other NoteWorld Insureds.

When applying for the Policy in 2009, with an intent to deceive Underwriters, NoteWorld failed to disclose at least nineteen prior professional liability claims against NoteWorld LLC and/or NoteWorld Insureds, including at least one consumer class action lawsuit.

In the Application for the Policy, Underwriters asked NoteWorld whether any professional liability claims or suits had been brought against NoteWorld, any predecessor company or any proposed insured, to which NoteWorld responded “no.”

In issuing the Policy to NoteWorld, Underwriters relied upon the false statements of material fact in the Application. If NoteWorld had submitted to Underwriters truthful and accurate insurance applications, Underwriters would not have issued the Policy, or would have done so on materially different terms.

Underwriters seek a declaration from this Court, pursuant to 28 U.S.C. § 2201, that Professional Services Liability Policy SUA 12139 issued to NoteWorld is rescinded and is void ab initio.

On March 24, 2010, NoteWorld provided notice to Underwriters of a Complaint filed against, among others, NoteWorld, LLC d/b/a NoteWorld Servicing Center, on behalf of a purported class of Washington consumers in a matter captioned: Doyle Wheeler and Carrie Wheeler, etc. v. Freedom Debt Center et al. which was filed in the Superior Court for the State of Washington on January 15, 2010, and is identified as Case No. 10200225-6. NoteWorld also provided notice to Underwriters that on June 24, 2010, a lawsuit was filed by the same plaintiffs against, among others, NoteWorld, LLC d/b/a NoteWorld Servicing Center, on behalf of a purported class of Washington consumers, which was filed in the United States District Court for Eastern District of Washington, is captioned: Doyle Wheeler and Carrie Wheeler, etc. v. NoteWorld, LLC et al. and is identified as Case No. CV 10-202.

On August 24, 2010, NoteWorld provided notice to Underwriters of a Complaint filed against, among others, NoteWorld, LLC d/b/a NoteWorld Servicing Center, on behalf of a purported class of Washington consumers in a matter captioned: Dianne Morefield v. NoteWorld, LLC, which was filed in the Superior Court for Richmond County, Georgia, and is identified as Civil Action No. 2010 RCCV 550. On March 2, 2011, NoteWorld provided notice to Underwriters that the law firm representing the Morefield plaintiffs had filed a federal action against NoteWorld, LLC, and that the federal action contains the “same causes of action and the same allegations” as the Morefield Georgia State action. The federal action is captioned: Hattie Burke v. NoteWorld, LLC dab NoteWorld Serving Center, was filed in the United States District Court for the Southern District of Georgia on February 25, 2011 and is identified as Case No. 1:11-cv-00029.

NoteWorld submitted to Underwriters an application for insurance coverage dated November 8, 2009, signed by Linda Remsberg, the sole owner, President and CEO of NoteWorld, LLC (the “Application”).

NoteWorld also submitted to Underwriters a supplemental application for insurance coverage dated November 30, 2009, also signed by Linda Remsberg.

The Policy states, in Section VII. A., that the application is part of the Policy. A true and correct copy of the Policy is attached hereto as Exhibit A. True and correct copies of the Application and Supplemental Application attached to and are a part of the Policy.

NoteWorld made material misrepresentations of fact in the Application and the Supplemental Application for the Policy and was aware, at the time of execution and submission, that such information was false.

KNOWING MATERIAL MISREPRESENTATIONS
IN ANSWER TO QUESTION 39 OF THE APPLICATION

Question No. 39. of the Application inquires:

39. Has any professional liability claim or suit ever been brought against the Applicant and/or any predecessor company and/or any person proposed to be insured?

[Answer: ] No

If “Yes,” How many?

[Answer blank]

If “Yes, please complete a Claim supplement/Potential Claim Supplement for each.

[None submitted].

Prior to the inception of the Policy on November 30, 2009, at least 19 lawsuits, including at least one consumer class action, had been made against one or more of the NoteWorld Insureds and/or their predecessors in business.

At the time of the submission of the Application, Remsberg and certain other officers and employees of NoteWorld knew of the existence of those lawsuits and, with intent to deceive Underwriters, NoteWorld concealed that information in response to question 39 of the Application.

NoteWorld’s prior claim history was material to Underwriters’ evaluation of the risk assumed. If NoteWorld had submitted to Underwriters truthful and accurate information in response to Question 39 of the Application, Underwriters would not have issued the Policy, or would have done so on materially different terms. – 3-11-cv-05394-BHS, Exhibits

Update

The last action on the case was on October 5, 2011. A seven day jury trial is scheduled to begin on October 16, 2012. – Source

Amrish Rajagopalan v. NoteWord – Filed July 26, 2011 – Washington Class Action

Summary from the complaint:

Many Americans suffered – and continue to suffer – extreme financial and emotional hardships as a result of the recent recession. From these difficult times rose a highly profitable industry purporting to provide “debt relief” to financially troubled and over-extended consumers. While there are, no doubt, many companies in the debt-relief industry that provide genuine assistance to consumers, there are also countless bad actors who see a consumer in financial distress as just another mark to be taken. NoteWorld and its network of conspirators and accomplices form a perfect example of the latter. To NoteWorld and its network, the recession offered not hardship, but windfall profits through exploitation of those suffering financial hardships.

NoteWorld engages and relies upon a network of “front-end” debt settlement companies (“Front DSCs”) that it utilizes to recruit customers. The Front DSCs offer to act as intermediaries between distressed and distraught debtors and their creditors, using inflated claims
and misrepresentations about their services to sign up customers, and charging exorbitant and
abusive fees once the mark is on the hook. The Front DSCs require customers to set up an
escrow account into which the customer makes a monthly deposit, generally via an automatic
electronic funds transfer. These accounts are then administered by NoteWorld, which is a “backend” debt settlement company. In theory, once a sufficient balance accumulates in the escrow account, the Front DSCs will approach creditors and utilize the accumulated balance to settle outstanding debts for a lump sum in return for fees that are strictly regulated by law. The reality, however, is very different.

NoteWorld represents to consumers that it is independent and unaffiliated with the Front DSCs and that consumers will at all times have control over their money. These statements are false. In fact, NoteWorld is deeply intertwined with and actively conspires with the Front DSCs. Indeed, for most of the Front DSCs, NoteWorld provides the software through which consumers view their account balances and “approve or decline” the settlement agreements with their creditors. This software in many cases represents the bulk of the “services” that the Front DSC actually provides.

Contrary to NoteWorld’s assurances, it does not act as an independent fiduciary. Instead, together with its network of Front DSCs, it loots customers’ escrow accounts by withdrawing exorbitant and abusive fees pursuant to debt settlement contracts that are wholly fraudulent and known to NoteWorld to be so. Moreover, the contracts, as well as the fees charged by both NoteWorld and the Front DSCs, are illegal under Washington State laws regulating the debt settlement industry. In many cases, as a result of the exorbitant fees charged, it is impossible for the consumer to ever accumulate sufficient funds for his or her debts to be settled as promised.

If consumers discover the fraud and attempt to retrieve the illegally extracted fees, they often find that the Front DSC is nothing more than a shell entity with no real address and no discernable ownership structure. NoteWorld, for its part, stonewalls customers and refuses to refund illegal fees, hiding behind false claims that it “only” provides “payment processing” services; that it is “not a debt settlement company”; and that it is wholly “independent” from the vanishing Front DSCs.

NoteWorld’s claim that it is not a debt settlement or “debt adjusting” company is particularly outrageous, since it clearly meets the statutory definition for such companies. Moreover, the online account management tool that NoteWorld provides for customers specifically has a section entitled “Settlements,” where customers can “get more details about [pending settlement agreements] and … approve or decline the proposed agreement[s].”

Plaintiff brings this action pursuant to the Racketeering Influenced and Corrupt Organizations Act (“RICO”) and Washington state law, to remedy and stop NoteWorld’s illegal conduct. Plaintiff brings this action on behalf of himself and a Class consisting of all persons in the United States who established an account with NoteWorld LLC (or any subsidiary thereof) from which NoteWorld processed any payments related to any debt settlement program.

NoteWorld acted – and continues to act – in concert with the Front DSCs to perpetuate an unfair, deceptive, and fraudulent business scheme injurious to consumers and violative of RICO, Washington’s debt adjusting statute, WASH. REV. CODE § 18.28, and the Washington Consumer Protection Act, WASH. REV. CODE § 19.86.

Plaintiff Amrish Rajagopalan is a North Carolina resident and an electrical engineer. Plaintiff signed up for the debt settlement services of NoteWorld and a member of its Front DSC network. As a result, Plaintiff was defrauded of thousands of dollars by NoteWorld and its co-conspirators and accomplices.

NoteWorld, LLC, d/b/a NoteWorld Servicing Center (“NoteWorld”), is a Delaware limited liability company with its principal place of business in Tacoma, Washington. According to its Sign-Up Agreement, NoteWorld “is in the business of providing transaction management and processing services and certain related services as an independent third party,” and its website touts its aim “to be the most respected 3rd party payment service provider in the
world, where there is a written promise that dictates the responsible and accurate treatment of the payment.”

NoteWorld has conspired and/or currently conspires with scores (if not hundreds) of front-end debt settlement companies (“Front DSCs”), who together with NoteWorld compose the NoteWorld Enterprise. Those Front DSCs include at least the following entities: First Rate Debt Solutions, Expert Settlement Professional, P&E Solutions, Freedom Debt Center, Accredited Financial Corporation, Amber Network Inc., Best Debt Options, Beyond Financial Service, Brite Credit Inc. (d/b/a Brite Credit 123), Century Negotiations Inc., Clear Debt Solution, Coastal Debt Solutions LLC, Consumerwise Debt Solutions Inc., Counsel 4 Debt Relief, Countrywide Debt Solutions Inc., Credit Care Corporation, CreditCare Pro, Debt Help Center USA, Debt National Relief, Debt Reinvestment, Debt Solutions, Debt Erase Inc., DebtPointer Inc., DebtPro LLC, DTS Financial Group, E.A.C. Financial LLC, FBL Associates, Freedom Debt Solutions, Help Settle LLC, Helpsettle.com, Innovative Debt Solutions, Lifeguard Financial, Maximum Debt Solutions, Morgan Stevens Financial Solutions Company, National Financial Freedom LLC, Nationwide Consumer Advocacy Group, On Track Financial LLC, Personal Debt Systems of America, Princeton Debt Management LLC, Reduce My Debt LLC, Settle A Debt Inc., Settlement Corporation of America, SilverLeaf Debt Solutions, The Debt Answer, The Debt Cure, US Consumer Report, Vision Debt.com and World Debt Solutions. – Source

Update

The last action on this case was October 5, 2011. NoteWorld filed a motion to dismiss. You can read it here.

Reader Wants to Know Whats Up With NoteWorld Lawsuit
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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.

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