Details on Suit Filed Against Legal Helpers Debt Resolution by Illinois Attorney General Madigan

For the sake of disclosure, everything below is what is alleged in the lawsuit against Legal Helpers Debt Resolution, also known as Macey, Aleman, Hyslip & Searns.

The suit kicks attorney model debt settlement and says it is no better than service delivered by a non-law-firm debt settlement provider.

LHDR rarely, if ever, negotiates settlements with all of consumer’s creditors.

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The lawsuit was filed today, March 2, 2011 by the State of Illinois against Legal Helpers Debt Resolution (LHDC).

The full complaint can be read here.

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The Highlights

  • State of Illinois states LHDR has “engaged in acts or practices that violate illinois law since at least March 2009.
  • LHDR “contracts out virtually all debt relief services to a third party operated and staffed by non-lawyers.”
  • State does not give LHDR a pass on fees and states they violate the Illinois Debt Settlement Consumer Protection Act.
  • LHDR “lures consumers through multiple marketing methods and claims its services, via a law firm, are superior to other debt settlement services.
  • LHDR makes numerous claims that a law firm will be handling consumers’ debt resolution but that is not true.
  • Mailers for the U.S. National Debt Relief Plan led consumers to LHDR.
  • The mailers offered to settle debt by 50% or more.
  • “Consumers that respond to LHDR’s website or other lead generating ads, ultimately find themselves speaking with a sales person recruited by LHDR to enroll consumers into a debt settlement program.”
  • LHDR rans Sales Executive ads like the one below.
  • “LHDR tells consumers that with a law firm, not only are the debts negotiated for less than they owe, but they will have the support of a national law firm governed by the American Bar Association. (The American Bar Association does not regulate attorneys in Illinois. In fact, attorneys in Illinois are regulated by the Attorney Registration and Disciplinary Commissions of the Supreme Court of Illinois and analogous entities in other states.)”
  • LDHR charged a retainer of $500, a monthly fee of $49, and 15% of the total debt.
  • If LHDR “is able to obtain a 65% or greater reduction of consumer’s scheduled debt, consumers agree to pay LHDR 5% of the savings based on enrolled debt.”
  • Once the consumer signs the agreement with LHDR, all debt resolution services are provided by a third party.
  • LHDR has entered into servicing agreements with Nationwide Support Services and Eclipse Financial Services, as an example.
  • Consumers report they have no contact with a lawyer after enrolling.
  • The 15% of the enrolled debt is paid to a third party.
  • First three months payments goes to fees plus a portion of the next 12-18 months payments.
  • “This advance fee structure makes it difficult for consumers to save funds for anticipated settlement offers.”
  • Consumers are directed to NoteWorld or Global Client Solutions for escrow accounts.
  • Negotiations with creditors does not begin for some time, “which is at least two to three months.”
  • LHDR rarely, if ever, negotiates settlements with all consumer’s creditors.
  • Participating in the program “does little to abate or prevent calls from creditors.”
  • In numerous instances consumer’s are sued “by one or more of their creditors or by one or more debt collection agencies.”
  • Many consumers drop out of the program “after they have paid most or all of their fees to defendant, but before defendant, or more accurately, the third parties they have agreements with, performs any debt settlement or debt mediation services.”
  • Some consumers experience a “substantial increase in their debt.”
  • “Consumer who have entered into agreements with LHDR state they have never spoke to or met with an attorney.”

Illinois is Asking for $$

The State of Illinois is asking for the following in the suit:

  • A penalty of $10,000 per violation of the Consumer Fraud Act for people 65 or older.
  • A civil penalty of $50,000 per violation of the Deceptive Trade Practices Act.
  • An additional $10,000 per violation of the Deceptive Trade Practices Act for people 65 or older.
  • LHDR to pay for all costs of investigation and prosecution.
  • Permanently enjoining LHDR from engaging in deceptive and unfair practices.
  • “Declaring all contracts entered into between the defendant and Illinois consumers by the use of methods and practices declared unlawful and rescinded and requiring full restitution by made.”

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