This has been a growing story over 2008 but I think it is a good example of the perils that consumers face when trying to get out of debt. We already have been ingrained to not trust credit counselors by the flurry of activity as the IRS targeted credit counselors a few years ago. But now lawyers acting on behalf of consumers are being targeted as well.
Apparently the main players in this story, Laura Hess and Edward Kennedy of Hess Kennedy and The Consumer Law Center, Also included was attorney Jeffrey Campos of the Legal Debt Center. These lawyers have been really pushing the envelope but what caught my eye was the fact that Chase Bank, one of the creditors they were suing on behalf of their consumer clients, sued the lawyers and law firm.
The Chase and state suits make essentially the same claims. They say Hess Kennedy and the affiliated Consumer Law Centers in Boca Raton and Delray Beach, Fla., falsely told customers that their credit card companies had violated the federal Fair Credit Billing Act. The law firm or the customers then wrote letters to credit card companies disputing all charges. In a Feb. 21 news release, McCollum said Hess and related companies falsely told clients that they “did not have to pay creditors and creditors could not sue or otherwise take action against them” once the letters were sent to credit card companies claiming FCBA violations. Chase’s federal court suit said defendants misled card members into believing they can stop payments on debts dating back years “until Chase investigates and resolves the purported ‘billing error disputes’ to their satisfaction.”
“Defendants’ conduct is entirely in bad faith and serves no legitimate purpose,” the Chase suit said. “Defendants’ ulterior goals are to extract fees from card members who should be paying the money to Chase to satisfy their debts and to maliciously harass Chase in an improper (albeit unsuccessful) attempt to coerce the elimination of their clients’ legitimate debts.” – See Law.com for more.
The Florida Attorney General was very clear in his recent words about companies, lawyers or not, that claim to eliminate debt that you owe.
“Most of what they’re doing, these debt organizations, is just plain malarkey,” McCollum said at a Capitol news conference. “I want to close these companies down. They are bad, bad, bad.”
An egregious example are companies that promise to wipe out debt completely for a few thousand dollars, he said. These debt-elimination firms give their customers bank certificates purported to be get-out-of-debt cards, but in reality are worthless.
“Don’t ever buy into debt elimination,” McCollum said. “Nobody can eliminate your debt.”
Jeffrey Tromberg, a bankruptcy lawyer with the Florida Debt Relief Center in Fort Lauderdale, said many clients come into his office only after wasting thousands of dollars on debt-relief companies. He wants to see them outlawed, or at least banned from collecting up-front fees.
“I’ve never come across a debt-relief company that actually did everything they promise to do,” he said. “The consumer, having tried to get out of debt, is left many times in a much worse position.” – See Sun Sentinal for more.
Certainly all of that sounds like bad news but this little tidbit caught my attention.
Capital One has agreed to forgive the credit card debts of 18,000 consumers who had contracted with debt settlement companies affiliated with Coral Springs attorney Laura Hess, Florida Attorney General Bill McCollum said Wednesday, following a $1.8 million settlement. The Attorney General sued Hess, her firm Hess Kennedy Chartered LLC and the Consumer Law Center for deceptive trade practices in February, saying the companies had promised to negotiate lower rates with their customers creditors but never made payments.
But what looked like Hess Kennedy may have actually been able to get debts discharged became more clear with the following.
Attorney General Bill McCollum today announced that a settlement has been reached in a case brought by Capital One against affiliated Hess Kennedy companies which engaged in fraudulent debt settlement activities. Under the settlement approved today, Capital One will forgive the credit card debt of approximately 18,000 consumers nationwide, including nearly 1,900 Florida residents, who contracted with the Hess Kennedy companies for the fraudulent services. Laura Hess and the Hess Kennedy Companies are currently in Receivership as a result of a lawsuit filed by the Attorney Generals Office in February. As part of this settlement, Capital One will receive a payment of $1.825 million from the assets of the Hess Kennedy companies.
I applaud Capital One Bank for being proactive in assisting its customers who were taken advantage of by this scheme, and I encourage other banks and financial institutions to follow this excellent example and to work with my office on behalf of their customers who have also been victimized , said Attorney General McCollum.
Earlier this month, Judge Ronald Rothschild in Broward County Circuit Court ordered Hesss companies be liquidated and settlements be reached to help provide restitution to affected consumers. Capital One will receive a payment of $1.825 million from the assets of the Hess Kennedy companies and the impacted consumers will soon receive letters from the Receiver containing additional information about the effect of the settlement on them.
The Attorney Generals Office had sued and obtained injunctions and Receivership orders against Hess and her companies for engaging in deceptive debt settlement and debt management practices victimizing tens of thousands of consumers. Hess and the Hess Kennedy group of companies are now under Receivership as a result of the Attorney Generals lawsuit.
Capital One cooperated with the Attorney Generals Office to assist in the actions against the Hess Kennedy companies and partnered with the Attorney General to have an injunction entered against Hess Kennedy to further protect consumers from Hess Kennedy’s abusive practices.
The lawsuit against Laura Hess was filed by the Attorney Generals Economic Crimes Division and named Hesss Broward County law firm and several other Florida-based companies she controlled. The lawsuit accused Hess of signing thousands of credit card debtors up for debt management services and claiming the law firm would provide legal services to cancel debts for pennies on the dollar. Representatives of Hess allegedly told consumers that the companies had audited the consumers accounts and found numerous violations under the Fair Credit Billing Act, then sent notices to creditors disputing all charges. Consumers were falsely told that once these notices were issued, the consumers did not have to pay creditors and creditors could not sue or otherwise take action against them. This deception led to lawsuits and other actions against several debtors.
A Receiver is a court-appointed individual who takes control of the operations of a company or companies for the purpose of protecting assets and customers under the authority of the court. – Attorney General of Florida
The situation decompensated into the Hess Kennedy scam leading to revelations of wrong doing by the law firm and being sued by several states, including Florida.
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On Friday, July 18,2008, Broward County Circuit Court Judge Ronald J. Rothschild appointed Daniel J. Stermer of Lewis B. Freeman & Partners, Inc., to be the Receiver of the companies sued in the case of Office of the Attorney General, Department of Legal Affairs, State of Florida, v. Laura L. Hess, Esq., Laura Hess & Associates, P.A., Hess Kennedy Chartered, LLC, and The Consumer Law Center, LLC, Case Number CACE08007686, as well as Receiver for “all other entities operated, controlled or otherwise associated with the Defendants’ activities, including but not limited to Hess Kennedy Company Chartered, Consumer Recovery Team, Hess Kennedy Holdings Ltd., Legal Debt Center, Hess Kennedy Company, Laura Hess Inc., Hess Kennedy,m Legal Debt Center, LLC, Hess Kennedy Florida, Hess Kennedy Chartered, Hess Kennedy, LLC, Hess Kennedy Payment, Hess Kennedy Trust Company, The Consumer Law Center, LC, Hess Kennedy Florida, Hess Kennedy Trust Account, Global Payment Processing, LLC and Campos Chartered Law Firm. See notice.
But these debt relief scams don’t just have nameless victims, they suck in real families that get hurt in these scams. Sadly, consumers are often their own worst enemy by thinking that debt can be magically erased with some trick, it just can’t.
Brad Jewell said he wished he had known about Hess Kennedy and its practices before a radio ad caught his attention in the fall of 2007.
The ad claimed that the Consumer Law Center could wipe away debt in 36 months, Jewell said.
The Jewells had always carried some credit card debt, but the debt became unmanageable after Denise’s mother died in April 2007.
The couple didn’t have enough cash, so they put $10,000 in funeral-related expenses on one of their credit cards, maxing it out. The interest rate nearly tripled to 29%, Brad Jewell said.
By January 2008, when they signed up with the Consumer Law Center, they owed $35,000.
Instead of reducing their financial problems, the company multiplied them.
The Jewells, like many other consumers, paid the debt settlement company thousands of dollars in fees and monthly payments – payments that were supposed to be set aside to eventually pay off their renegotiated debts.
On the advice of the company, the Jewells and other consumers stopped paying their creditors, with the understanding that the company would go to court and force a better deal.
When that didn’t happen, the credit card companies sued.
The Jewells said the Consumer Law Center told them they didn’t have to come to court, where a lawyer provided by the company would represent them. But no lawyer showed up in court for hearings on Sept. 19 or Oct. 2, and the judge issued default judgments against the couple.
Because of the default judgments, the Jewells faced having a quarter of their wages garnished to pay back their debts, Brad Jewell said. They filed for bankruptcy on Wednesday. – See Milwaukee Journal Sentinel for more.
The case of Wally Bowman is another example of someone that could have avoided the magic wand to resolve his debts, only leading him into an unfortunate situation.
Wally Bowman, a part-time security guard in Miamisburg, Ohio, had roughly $15,000 in credit-card debt when he signed up with a “debt settlement” firm last year. The company said it could resolve his debts for far less than the amount he owed and advised the 63-year-old to stop making payments to his creditors, according to Mr. Bowman.
Mr. Bowman paid hundreds of dollars in up-front fees and made regular monthly payments of $249 to Hess Kennedy, but the Coral Springs, Fla., firm never settled any of his debts, he says. By the time he dropped out of the program this summer, Mr. Bowman says, his debt had ballooned to about $20,000, due to interest and late fees, and creditors were threatening to garnish his wages. Finally, he filed for bankruptcy last month.
“I wish I had done that to begin with,” Mr. Bowman says. “I’d have been much better off.” – See Wall Street Journal for more.
Another persons case and claims against debt relief services.
First, Roberta Krassner’s husband died. Then she was diagnosed with cancer. Finally, a debt relief company called and offered her some good news: help with the five-digit balance on her credit cards and renegotiating her adjustable-rate mortgage to a fixed rate.
She was alone. She needed help and it sounded like a good idea. So Krassner, who describes her age as “senior citizen,” signed a contract in February. It allowed the company to automatically withdraw $349 from her bank account every month, about half her Social Security check.
Krassner, of Lake Worth, said the company did very little for the $1,750 she paid. As for her credit card debt, the company “made a couple of calls” and came back to her with a proposal to make a reduced, lump-sum payment of $5,000 – an amount she could not raise, she said.
The company did secure a fixed-rate mortgage with an interest rate that added about $100 to her monthly mortgage payment. She expects the bank will file for foreclosure next month.
“I’m not that savvy. … I didn’t know what I was signing,” said Krassner, who got a new Social Security number and established a new bank account to stop the automatic withdrawals. “This is highway robbery, thievery.” – See Palm Beach Post for more.
The lessons to be learned here are that there are limits and boundaries that people can enjoy in getting rid of their problem debt. Ultimately bankruptcy is the only legal and binding action that will accomplish that goal for most.
It is not as if groups and organizations might not have valid complaints to go against creditors with but fairly or not, debt relief groups are not only suspect at times but also up against large creditors and dealing with a problematic framework of multiple state laws when taking on cases from out of state.
There is nothing wrong in taking on a firm or group to help you fight your debt as long as you realize that their efforts are an attempt to accomplish your goals and not a guarantee. When it comes to discharging or reducing debt, bankruptcy is the only real solution you can count on.