Morgan Drexen Applauds the Regulatory Reform Bill
The Financial Regulatory Reform Bill is Already Facing Criticism, Morgan Drexen President Steph Nagin Applauds the Reform Bill — This Will Help to Afford Consumers the Protection They Deserve
The financial regulatory reform bill to be passed by Congress this week promises to give consumers extra protection. However, will this prevent a future economic crisis?
It has been a year in the making and, finally there is a final version of regulatory reform from Congress. Charles Geisst, Professor of Finance at Manhattan College is dubious the new financial reforms can be enforced. Geist says, ”There are too many aspects to the proposed reforms. This will make them difficult to enforce. It is very ambitious.”
Morgan Drexen President and Florida Super Attorney Steph Nagin disagrees. He thinks that the bill will be enforceable. Steph Nagin is President of Morgan Drexen, a legal software company. They provide integrated legal services to attorneys, working with consumers to settle debt. So how will this reform bill affect his business?
He says, “The issue is not attorneys working in the debt settlement industry. The practice of law is governed by traditional regulatory rules of professional conduct, in the state where the lawyer is licensed. However, the proposed financial regulatory reform will require stringent enforcement of unscrupulous practices by debt settlement companies not under lawyer supervision.”
For the average consumer this reform bill means, non-attorneys working in the debt settlement industry will be stringently regulated. Nagin says, “Morgan Drexen worked closely with the Congressional staff and has publicly assisted the Federal Trade Commission (FTC) to ensure tighter restrictions. We welcome any protection for America’s consumers.”
The reform bill creates the Consumer Federal Protection Bureau (CFPB), which is extremely important according to Ellen Bloom, Director of Federal Policy at Consumers Union. “Consumers have suffered plenty during this financial crisis and now they have an entity that’s watching out for them.”
Morgan Drexen works closely with Congressional staff and has publicly assisted the (FTC) to ensure that tighter federal regulations are imposed to protect vulnerable consumers in extreme financial distress. – Source
What strikes me is that the position of Morgan Drexen appears to be clearly that debt settlement firms run by lawyers will be unregulated and the FTC does not have the power to protect consumers from attorney run debt settlement companies.
Yet the two most colossal failures of debt settlement companies that come to mind are both attorney run debt settlement companies; Allegro Law and Hess Kennedy.
The press release states “Morgan Drexen worked closely with the Congressional staff and has publicly assisted the Federal Trade Commission (FTC) to ensure tighter restrictions.” Yet Morgan Drexen’s own documentation to the FTC says “MD reaffirms its publicly stated position that it supports partial federal regulation of debt relief services.” – Source
Morgan Drexen also said they were against an advance fee ban under the Telemarketing Sales Rules put forth by the FTC:
FTC Question: What would be the impact of the proposed Rule changes (including any benefits and costs), if any, on industry?
Morgan Drexen Answer: Given the Company’s belief that its business model would be imperiled if the proposed amendments to the TSR are enacted as set forth in the NPRM, it is uncertain whether it would be prudent to invest in further infrastructure. Further, because its “just in time,” outsourced business model is heavily dependent on law firms’ offering unbundled legal services to near-bankrupt debtors, cessation of revenue as proposed in the Commission’s Rule amendments would deleteriously affect not just MD, but also the law firms on which it depends for business, as well as on potential clients of law firms. Those law firms would no longer be able to obtain value- priced services so inextricably intertwined with their interests and the objectives of their clients, were MD to discontinue servicing the future debt settlement clients of those law firms.
The Commission’s intent to subject state-licensed and judicially regulated lawyers to new federal regulation of the portion of their practice that utilizes in-bound telephone calls through mass-media advertising (which would include telephone books, newsletters, and television and radio commercials) would impose significant additional reporting burdens and expense. Additionally – as currently proposed – the amended Rule would invade the attorney- client privilege and the work-product doctrine), which could simply drive some lawyers to discontinue serving near-bankrupt debtors. MD believes this assessment to be realistic, because most small law firms generally work in a paper-driven environment, and lack personnel or financial resources to efficiently undertake the reporting burden contemplated by the proposed Rule amendments. – Source
MD could not function and could not adapt its business model to accommodate the lack of its initial fee and progress payments, given the marketing expenditures and salaries necessary to sustain operations. – Source
So my take on the Morgan Drexen press release just out is they are feeling more confident that the FTC will carve out a niche to let the attorney model through without regulation. It appears to me that Morgan Drexen wants to drive out non-attorney debt settlement companies while they get to continue charging consumers advance fees for debt settlement.
Recent testimony by the following consumer and lawyer groups to the FTC advised the FTC to not allow attorneys to side-step the advance fee ban for debt settlement services. – Source
- Americans for Financial Reform
- California Reinvestment Coalition
- Center for Responsible Lending
- Consumer Action
- Consumer Federation of America
- Consumer Watchdog, Consumers Union
- Empire Justice Center
- Lawyers’ Committee for Civil Rights Under Law
- Leadership Conference on Civil Rights
- National Association of Consumer Advocates
- National Community Reinvestment Coalition
- National Consumer Law Center (on behalf of its low income clients)
- National Council of La Raza
- National Fair Housing Alliance
- Neighborhood Economic Development Advocacy Project
- A New Way Forward
- New York Public Interest Research Group
- Sargent Shriver National Center on Poverty Law
- U.S. PIRG Western States Center
We’ll just have to watch and wait. Until then I struggle to understand how Morgan Drexen can say “Morgan Drexen works closely with Congressional staff and has publicly assisted the (FTC) to ensure that tighter federal regulations are imposed to protect vulnerable consumers in extreme financial distress.” when their very testimony to the FTC seems to contradict that statement.
Is it just me or does the public statement by Morgan Drexen ultimately read like they are all for consumer protection legislation as long as it doesn’t pertain to them?
The ultimate irony is they quote Consumers Union to bolster their press release yet Consumers Union testified to the FTC to not give lawyers a pass.
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