The Consumer Law Group should be barred from illegally collecting money to settle debts and made to pay refunds to more than 3,000 North Carolinians, according to a lawsuit filed by Attorney General Roy Cooper.
“Taking advantage of consumers who are trying to pay off their bills is wrong, and it’s also against the law,” Cooper said. “Never agree to pay an upfront fee to anyone who promises to help get you out of debt.”
Cooper’s Consumer Protection Division filed suit Friday against the Consumer Law Group (CLG), based in Boca Raton, Florida. Also named as defendants in the case are managers Michael L. Metzner, Ran David Barnea and Daniel T. Post and a related company, American Debt Negotiators, Inc.
Cooper is asking the court for a temporary ban on all defendants’ illegal practices and a permanent ban to stop their unlawful debt adjusting and other deceptive practices. He is also seeking refunds for North Carolina consumers, cancellation of all contracts, payment of civil penalties, and a freeze of the company’s assets.
Cooper contends that CLG has deceived consumers by promising to reduce their debts by half and leave them debt-free without bankruptcy, collecting more than $2.6 million from 3,000 North Carolinians to date. In reality, CLG rarely works out agreements to settle debts but keeps substantial fees anyway. The company also claims that its services are performed by attorneys when they are not, and misleads consumers to believe that its program is government-affiliated.
According to the Attorney General’s Office, CLG pitches its services online and through radio advertisements, telemarketing calls, and local telephone book listings. For example, the current Raleigh phone book includes 13 listings connected to CLG under “Consumer Credit Counseling.” Although the listings are for local telephone numbers, they connect callers to telemarketers in the company’s Florida office.
Seven consumers have filed complaints about CLG with Cooper’s Consumer Protection Division. The following consumers’ stories, taken from affidavits filed with the suit, illustrate how CLG works:
- A retired Raleigh couple living on a fixed income turned to CLG for help getting out of credit card debt. They heard about CLG through an ad on a local Christian radio station that said that the company’s services were “part of the government’s debt relief plan.” After paying nearly $3,000 over 10 months, the couple has yet to get any help resolving their debts and can rarely get anyone at CLG to take their calls.
- A Winston-Salem woman who lost her job called a number in the phone book seeking credit counseling. The number she called connected her to CLG, which told her it would negotiate to reduce her debts and settle her bills. She made monthly payments to CLG for more than a year totaling close to $8,600 but got no help. She was eventually able to get $3,300 of her money back after calling the company repeatedly, but her debts remain.
- A disabled Sanford resident called CLG after hearing on the radio that it was affiliated with the President’s stimulus plan, believing she could trust the company to help her resolve $10,000 in debt since it seemed to be a law firm. She made monthly payments to the company and took its advice not to speak with her creditors and to stop paying her credit card bills. After nearly a year with no results, she demanded her money back and eventually got a full refund after contacting the Attorney General’s Office. She now faces possible bankruptcy because her bills piled up during the time that CLG was supposed to be helping her.
As alleged in the complaint, CLG has collected more than $1.6 million from more than 650 North Carolina consumers like these, supposedly to help resolve their debts. Of that money, only $202,000 has actually been used to pay down consumer debts. Most consumers who’ve paid the company have gotten little or no help settling their debts or working out payment plans with their creditors.
The complaint also contends that CLG signs consumers up for a debt management company located at the same address. The defendants have collected an additional $1 million plus in fees from approximately 2,500 North Carolina consumers for enrolling them in debt management plans, fees that exceed what’s allowed under state law.
Under North Carolina law, it’s illegal to charge an upfront fee to help you negotiate your debts, also called debt adjusting or debt settlement. North Carolina law does allow qualified credit counselors to charge limited fees to help you set up a plan to make timely payments on your debt, called a debt management plan. State law limits the fees for debt management plans to an initial set-up fee of $40 and monthly fees of 10% of the monthly payment up to $40.
Cooper contends that despite its name, the CLG employs mostly telemarketers who pitch debt settlement services, not lawyers. While Metzner is a Florida lawyer, he is not licensed to practice in North Carolina and the company is not a law firm. A number of related businesses are located at the same address as CLG in Boca Raton, including American Credit Counseling, Inc., Leads 2 U, BMV Debt Management Corp., American Debt Negotiators, and Consumer Advocates Credit Counselors, Inc.
“If you need help digging out of debt, don’t get trapped in a scam that puts you deeper in the hole,” Cooper said. “Find a non-profit credit counselor in your community who can offer real help instead.”
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