Back in May of 2010, Brett and Linda Davis filed a class action suit against Global Client Solutions, GHS Solutions, and Rocky Mountain Bank & Trust.
The suit said: “Defendants are engaged in a continuing class-wide predatory business scheme to financially enrich themselves and defraud Kentucky Class members by violating Kentucky’s Debt Adjusting statute, Chapter 380; by the commission of unfair and deceptive practices in violation of Kentucky’s Consumer Protection Act, Chapter 367; and, by aiding and abetting in and conspiring to violate Chapters 367 and 380.” – Source
The case is ongoing.
But just recently GHS Solutions, Global Client Solutions, and Rocky Mountain Bank & Trust tried to get the court to enforce the arbitration agreement contained in the contracts. The court shut them down cold.
The suit arises out of Plaintiffs’ participation in a debt settlement program. Subsequently, GHS, Global and Rocky Mountain have moved to compel arbitration.
These motions raise a host of questions concerning the enforcement of arbitration agreements, which Kentucky courts generally favor. However, the policy favoring arbitration must give way where the agreement to do so is procedurally or substantively unconscionable.
For the reasons that follow, the Court will not enforce these arbitration agreements.
This case brings up the shared liability between the marketer, debt relief company and backend vendors when a situation goes bad.
The court summary as part of the motion helps to give the short notes on this case.
In early 2009, Plaintiffs found themselves in a difficult financial situation due to, among other things, overwhelming credit card debt. Plaintiffs searched for a way to ease the debt, and after responding to an advertisement, a GHS representative contacted them. GHS offers a debt settlement service, whereby it negotiates settlements with the creditors of its customers. GHS is a Florida corporation with its principal place of business in Delray Beach, Florida. It is not licensed to do business in Kentucky and is not licensed as a debt adjuster. After the initial contact between GHS and Plaintiffs, the parties continued to communicate via telephone and email. GHS claims that Plaintiffs signed the GHS Client Service Agreement on March 12, 2009. Plaintiffs deny that an agreement was signed. It is unclear at this point whether Plaintiffs actually signed the Client Service Agreement.
GHS explained that as part of the debt settlement program, Plaintiffs would need to open an account at Rocky Mountain through Global. Rocky Mountain is a bank under the laws of Colorado, with its principal place of business in Florence, Colorado. Global is an Oklahoma LLC with its principal offices in Tulsa, Oklahoma. Plaintiffs signed the Special Purpose Account Application with Global and Rocky Mountain on April 7, 2009, giving Global the authority to transfer funds collected from Plaintiffs’ personal account at U.S. Bank into an account at Rocky Mountain. After depositing Plaintiffs’ funds into the Rocky Mountain account, Global would then distribute the money among Plaintiffs’ creditors. Global also pays fees to GHS from the Rocky Mountain account. From April 2009-March 2010, transfers were made into the Rocky Mountain account, and Global mailed Plaintiffs paper statements listing the transfers. During that time, GHS accepted fees in the amount of $3,523.32 from Plaintiffs, and nothing was paid to
In May 2010, Plaintiffs brought an action against GHS, Rocky Mountain and Global, citing violations of Kentucky’s Debt Adjusting statute, its Consumer Protection statute, and charging civil conspiracy. GHS filed a motion to compel arbitration and Rocky Mountain and Global filed a joint motion to compel arbitration. – Source
What is clear from this case is that all members of the debt relief food chain need to be aware of the mutual risks and liabilities that may arise when individual vendors provide part of the total solution for the consumer.
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