NC AG Not Laughing at Attorney Model Debt Settlement

Recently the office of Attorney General Roy Cooper went after Consumer Law Group, Michael Metzner, American Debt Negotiators, Ran David Barnea, and Daniel Post in a suit against them for debt settlement services.

I happen to have a copy of the complaint from the case and I wanted to run through it to point out some of the issues the AG felt were problem areas. – Source

  • “The defendents use deceptive representations to solicit consumers, including misrepresentations that the services are performed by attorneys and misleading suggestions that the defendants’ debt settlement program is government-affiliated.”
  • “The defendants promise to reduce consumers’ debt obligations by approximately 50% and to leave their client debt free without bankruptcy.”
  • “Despite being given written notice by the North Carolina Attorney General that their activities are unlawful, the defendants are continuing to collect illegal advance fees from North Carolina customer for debt settlement services, and to enroll new North Carolina consumers into their debt settlement program.” [That was just stupid on their part.]
  • “Further, in addition to their debt settlement scheme, the defendants are acting as an enrollment agent for a third party non-profit debt management company whose offices are at the same physical location as the defendants’ offices. ”
  • “The defendants operate their business in conjunction with a number of other related business entities located at the same 23123 State Road address in Boca Raton. These entities include American Credit Counseling, Inc., Leads 2 U, Inc., BMV Debt Management Corp, and Consumer Advocates Credit Counselors, Inc.”
  • “CLG also places misleading local telephone book listings in telephone directories throughout North Carolina to solicit customers for its debt relief services. For example, the current AT&T telephone book for the City of Raleigh contains 13 (13) listings under the name “Consumer Credit Counseling” in the white pages of the phone book, and eleven (11) listings in the yellow pages. These thirteen listings under the name “Consumer Credit Counseling” all list local telephone numbers, with many identified as being in surrounding cities such as Apex, Garner, Wake Forest; however no street address is provided.” Despite being listed as local telephone numbers for consumer credit counseling services, these telephone numbers actually connect customers with CLG sales representatives in Boca Raton, Florida, or with telemarketers in boiler rooms in other locations operating on CLG’s behalf.”
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  • Among other statements, CLF and its enrollment agents routinely tell consumers that if they enroll in CLG’s debt settlement program, the consumer will be represented by a law firm that has practicing attorneys in North Carolina; that the firm has extensive expertise in negotiating debts; that CLG’s debt settlement program will reduce the consumer’s unsecured debts by approximately 50%; and that consumers can become totally debt free in as little as two and a half to four years without filing for bankruptcy.”
  • “Further, CLG’s representatives routinely advise prospective consumer customers that the CLG “law firm” will provide them with legal protection against creditors’ collection efforts, that CLG will generally protect them from getting sued by their creditors, and that CLG will provide them with legal representation in the event they are sued.”
  • “Upon information and belief, CLG’s employees have no significant training, experience or expertise in the areas of credit counseling, debt management, or bankruptcy law. The defendants’ sales agents are primarily directed to sell the defendants’ program without analyzing the consumer’s financial situation and without determining whether a debt settlement program is appropriate for the consumer’s particular financial circumstances.”
  • “In March 2010, a North Carolina customer of CLG was sued by Citibank over a credit card debt that CLG was supposed to settle. The customer tried to obtain representation from CLG but a CLG attorney in Florida responded that CLG was not licensed to practice law in North Carolina. Instead, in May 2010, CLG e-mailed form pleadings to the customer for the customer to file pro se. The pleadings asserted patently frivolous defenses such as “unjust enrichment” and “unclean hands” (on the professed grounds that Citibank had suffered “no damages” as Citibank had “recently received a substantial Federal Bailout”).”
  • Despite the promises of legal representation, none of the defendants are licensed to practice law in North Carolina. On information and belief, defendants have occasionally referred a few of their North Carolina clients to a North Carolina attorney for purposes of bankruptcy representation or other assistance. The North Carolina referral attorney has his own independent North Carolina law firm; he has no attorney-cleint relationship with CLG’s customers; he does not handle any funds received by CLG from its North Carolina customers; he does not meet with, talk with, or have any other contact with any of CLG’s North Carolina customers, except on a very occasional basis; he does not negotiate with third party creditors on behalf of CLG’s North Carolina customer; and he is not otherwise involved with the operation of CLG’s debt settlement program.”
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  • According to records maintained by Vanco Services, LLC, a third party payment processor used by CLG, ACCI and CACC, CLG is charging North Carolina consumers fees ranging from $199 to $1588, merely to refer or to enroll consumers in ACCI’s or CACC’s debt management program. In addition to these steep enrollment fees, CLG also charges consumers monthly “monitoring fee” to purportedly “monitor” consumers’ debt management plans with ACCI or CACC. CLG’s monthly fee is typically $49 per month.”

    The argument made about the role the in state attorney actually played is a good one to show that “of counsel” relationships to avoid regulations may be very problematic and easy to discredit.

    Damon Day - Pro Debt Coach

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    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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