Lawyer Based Debt Settlement Networks Should Prepare for Lawyers to Be Sanctioned or Disbarred

The Chicago Tribune wrote today about a case I’ve talked about before, the State of West Virginia suit against Credit Card Defense Network (CCDN) and attorney Robert Lock.

What makes this case so interesting is that State is going after the attorney due to the relationship the attorney had with marketing firms that attracted clients for the legal firm debt settlement practice.

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Some debt settlement groups have felt that they were shielded from regulation by pushing attorneys out in front and saying what they did was all attorney based. They felt the attorney would give them an exemption from many regulations.

Even The Association of Settlement Companies (TASC) observed in their presentation where they suggested debt settlement companies move offshore that attorney based debt settlement was problematic. They said:

Associating With Law Firm or Attorney Model as an Alternative Proposed Rule

Difficult alternative to accomplish to avoid FTC regulation.

Proposed Rule will regulate the marketing and sales still, and very likely cover the fees paid for sales (or the non-legal processing service of the program since still related to settlement.)

Commentary already attacking it used by FTC on Loan Mods rule, likely they will use similar commentary for DS.

History of suing these models to make their point.

Model may have value, but the (1) attorney advertising and privilege issues, (2) license requirements, (3) fee splitting, and (4) about 8 other issues will likely make it easy grounds for attack. Email me if you want my list. 100% of negotiations should be done with the licensed attorney.Source

As Ameet Sachdev of the Chicago Tribune wrote:

CCDN contracted with marketing firms to acquire customers, according to the West Virginia suit. If the lead generator convinced a consumer to pay the $4,500 upfront, it retained $2,000 and gave $2,500 to CCDN, according to company documents included in the suit. The collection of an upfront fee in selling credit services over the phone is a violation of West Virginia law, Davis said. – Source

My opinion is this West Virginia case will have far reaching implications for attorneys across America that went for the quick buck and fronted debt settlement companies and split fees with marketing groups.

If you are an attorney and have been involved in this I’d love for you to comment and tell me what your position is on this issue.

If you want to read the entire West Virginia suit against attorney Robert Lock you can find it linked here.