DMB Financial Sued by Bankruptcy Trustee in NC Who Wants Money Back

In researching my last post on DMB Financial about the lawsuit they filed against the CFPB I could not help but notice recent suit against them by a Chapter 7 Bankruptcy Trustee in NC.

I can’t imagine there are many fun days in DMB Financial these days unless you like conflict.

On October 14, 2020, a lawsuit was filed naming DMB Financial.

The complaint states:

“5. DMB generally promises to operate as follows: the debtor pays a third party a certain sum each month, which DMB promises to remit to their creditors, after payment of fees and charges to DMB. Monies are to be paid to creditors as agreements are reached to compromise and reduce the debtors’ debts.

6. The Debtor disclosed payments of $20,395.00 to DMB since February of 2017 in the Statement of Financial Affairs.

7. Upon information and belief, few if any debts were successfully compromised or reduced for the Debtor by DMB.

8. DMB misrepresented its services to the Debtor, and has failed and refused to account to the Debtor for her payments.

9. The payments made to DMB by the Debtor exceeded the reasonable value of any services rendered by DMB.

10. On May 13, 2020, the Bankruptcy Administrator wrote the Defendant seeking further information regarding this matter, without response.”

What is a Reasonable Value for Services?

It seems like an almost impossible task to identify what the initial services of a settlement company are worth if they are in the collecting fund’s stage and if few if any settlements have been reached yet.

The argument by the Trustee may be a bit of a reach given what the facts in the Court document show but there it is.

A clawback of money paid to DMB Financial is the remedy sought.

But the fact DMB Financial and the Bankruptcy Trustee could not come to an agreement in May is apparently what eventually led to the lawsuit filed. It is very unfortunate that the matter could not have been settled back then because now the State of North Carolina is involved in the mix.

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The Trustee alleges DMB Financial settlement services sold to a North Carolina consumer and runs into trouble with the North Carolina Debt Adjusting Act.

Potentially this case could lead to DMB Financial running into more issues with the State of North Carolina, especially when the complaint states:

“WHEREFORE, the Plaintiffs respectfully pray the Court that:

1. The Court permanently enjoin Defendant and its agents, shareholders, principals, officers, directors, servants, employees, associates, assigns, successors, and all persons or entities in active concert and participation with them from continuing to violate the provisions of N.C.G.S. §14-423 et, seq. by debt adjustment services;

2. The Chapter 7 trustee or the Debtor have and recover damages against the Defendant, including, but not limited to treble damages under the NCUDTPA;

3. All transfers to the Defendant be avoided as fraudulent transfers and recovered By the Chapter 7 Trustee for the benefit of creditors.”

The full complaint is below. I’ll let you know if there any important updates.

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3 thoughts on “DMB Financial Sued by Bankruptcy Trustee in NC Who Wants Money Back”

  1. Most debt settlement companies charge fees of 20-25% of the enrolled debt. Fee is charged pro rata and only after a settlement is achieved. So, I imagine that the $20k of “payments” were not made to the debt settlement company, but that amount is just what the client put on deposit with the provider of the dedicated account that is used to support the debt settlement program. Also, the statute language cited that describes debt adjusting does not line up with the services and functions provided by a debt settlement company. Erroneous claims such as these are not unusual, in these kinds of filings.

    • We will have to let it all play out. But one point to correct, not all settlement companies charge pro-rata fees after a settlement is agreed to. The attorney model still exists in some companies. In those instances, the escrowed funds are drained before any settlement agreements are obtained.

  2. When I worked at National Litigation Law Group handling cases for clip of Freedom Debt Relief, setting multiple claims could be problematic. Freedom would often pay the from the escrow a count, requiring the client to wait several months to build money back up before other settlements could be reached.


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