Colorado Attorney John Suthers has sued Florida based Johnson Law Group and attorney Clint Johnson for offering debt relief services in Colorado without holding a debt management license. It appears the attorney exemption just plain did not work for Johnson.
This must have been one of the active investigations AG Suthers mentioned when I interviewed him at the recent National Association of Attorneys General meeting. You can listen to the interview here.
What appears to be an even bigger issue is the State of Colorado had sent a cease and desist letter to Clint Johnson and Johnson Law group in July of 2009, ordering the firm to comply with the Colorado licensing requirements. However debt settlement services were continued to be offered in 2010.
The lawsuit filed by the State of Colorado says:
Defendant JLG offers debt-management services to individuals across the United States, including to residents of Colorado.
JLG represents that it “can help restore that personal settled feeling that comes from getting your financial circumstances back in order.”
Defendants offer two types of programs: (a) ones that contemplate that creditors will reduce finance charges or fees for late payments (“Credit Counseling Program”); and (b) ones that contemplate that creditors will settle debts for less than the principal amount of the debt (“Debt Settlement Program”).
Most of JLG’s clients come to it through marketing agreements with front-end companies that advertise debt relief services.
If a client ultimately is accepted into one of JLG’s programs, JLG pays the marketing company a substantial fee for the referral and intake work.
Under both JLG’s Credit Counseling Program and its Debt Settlement Program, JLG agrees to act “as an intermediary between an individual and one or more creditors of the individual for the purpose of obtaining concessions,” (C.R.S. § 12-14.5-202(10)), from those creditors and thus is a Provider of debt-management services under the DMSA.
JLG contracted to provide debt-management services to at least 665 Colorado residents between January 1, 2008 and November 9, 2009.
JLG outsources much, if not all, of the debt-management services it agrees to provide to its clients to back-end processing companies. None of the back-end companies to whom JLG outsources debt-management services are owned by lawyers, yet JLG promises that “Attorneys” will be performing the work.
JLG has failed and refused to obtain a certificate of registration from the Administrator.
On July 29, 2009, the Administrator delivered to JLG a Cease and Desist Advisory. Per the Advisory, the Administrator advised JLG “to immediately CEASE AND DESIST” from offering to provide or providing debt-management services to Colorado residents without complying with state law.
JLG responded by indicating that it “recognize[d] that [it was] not currently compliant as a result of recent changes in the laws in the State of Colorado,” but that it would “cease and desist debt settlement services in Colorado.”
Despite this assurance, in mid-2010 the State learned that JLG had continued to provide debt-management services to Colorado residents.
Therefore, on or about September 29, 2010, the State served JLG with an Administrative Subpoena.
On October 29, 2010, JLG provided the State with a sample packet of forms that JLG uses with Colorado consumers. That packet included: (a) three sample service agreements; (b) two sample welcome letters; and (c) one client briefing. In addition, JLG provided three spreadsheets containing Colorado consumers to whom JLG has provided services.
On November 3, 2010, the State again contacted JLG seeking additional information concerning its Colorado consumers, and on November 5, 2010 and January 20, 2011JLG provided additional information.
According to the JLG spreadsheets, JLG provided debt-management services to665 Colorado residents after January 1, 2008.
After analyzing the materials JLG provided to it, the State delivered to JLG a proposed Stipulation and Final Agency Order (the “Stipulation”) on January 26, 2011.
As a result of Defendants’ violations of the DMSA, the Administrator is entitled to injunctive relief, consumer restitution, disgorgement, civil penalties, damages, and attorneys’ fees and costs. – Source
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The district court in Colorado has reversed its summary judgment and dismissed the entire case.
Hearing that summary judgement ha been awarded to the Colorado AG.
Johnson ordered to pay over $750,000 in restitution to Colorado consumers.