Update
A class action suit has just been moved to federal court in Georgia. The suit is Davenport v. Fresh Start Advisors, Fresh Start Advisors of Boca Raton East, Fresh Start Advisors of Boca Raton West, Fresh Start Advisors of Lauderhill, Fresh Start Solutions, Settlement Management, WPB Partners, Flow Capital Ventures, Debt Settlement Solutions, National Settlement Solutions, Discount Debt, jason Simons, Andrew Myers, William Blotnick, Richard Odle, Albert Auer, Michael Gamick, Karl Bucholz, Douglas Gass, Pasquale Paolini. (1:11-cv-02319-SCJ)
The statements below are drawn from the complaint filed.
The case is similar to others filed over the past year or so. It alleges the Defendants violated state debt adjusting laws while engaged in their debt settlement services.
“Defendants are a collection of interrelated entities, limited liability companies, corporations, partnerships, and/or individuals or a joint enterprise and/or venture that collectively compromise a debt adjustment services operation targeting financially troubled consumers and extracting exorbitant fees for worthless services from individuals least able to afford it.” – Source
The suit alleges the Defendants made claims they could get consumers out of debt in 12 to 36 months, lower bills, negotiate a settlement, and charged a front-loaded fee. Otherwise what is quickly becoming known as “The Usual.”
- On January 10, 2007, Plaintiff entered into an agreement entitled “Debt Settlement Services Agreement” with both Fresh Start Solutions, LLC and Fresh Start Advisors, LLC for the purpose of debt settlement.
- The Agreement requires their clients to pay a “non-refundable retainer fee of $795.00 or 6% of CLIENTs total unsecured debt whichever is greater” at the time of execution of the Agreement.
- Defendants additionally charge their clients a “monthly program fee of $29” each month that the client remains in the program.
- Defendants claim that they will arrange to settle their clients’ debts for 53% or less of what the clients owe their creditors. If Defendants are successful in settling a debt for less than 53% of what is owed, Defendants are to receive a “performance-based fee” of the difference between 53% and the actual amount paid to the creditor.
- Defendants debited Plaintiffs checking account in the amount of $717.70 each month beginning on January 20, 2007 and on the zoth day of the month until March 20, 2008, for a total of 15 payments equaling $10,765.50.
- Each month that Defendants withdrew monies from Plaintiffs account, Defendants kept a portion of the funds for themselves and deposited a portion of the fees in an account with Rocky Mountain Bank and Trust.
- In approximately April 2008, Plaintiff terminated her participation in Defendants’ DEP.
- After Plaintiff terminated her participation in the DEP, she demanded a refund of the fees that she had paid to Defendants, but none of the funds paid by Plaintiff were returned to her by Defendants.
- On June 13, 2008, Plaintiff demanded a refund of her funds held by Rocky Mountain Bank.
- Plaintiff received a check dated July 7, 2008 in the amount of $5,624.94 drawn on a Global Client Solutions, LLC account held at Rocky Mountain Bank.
- Thus, Defendants kept $5,140.56 of Plaintiffs money and never paid one dime to any of Plaintiffs creditors.
This case is a great example of why I keep telling debt relief companies of all kinds to refund client fees in full. This stuff can come back years later to haunt you if you try to be clever or play fast and lose with refunds.
This suit was filed by a gang of attorneys.
Kris Skaar (krisskaar@aol.com)
James M. Feagle (jimfeagle@aol.com)
Skaar & Feagle, LLC
108 E. Ponce De Leon Avenue, Suite 204
Decatur, Georgia 30030
(404) 373-1970
George Richard DiGiorgio (rdigiorgio@cwcd.com)
F. Jerome Tapley (jtapley@cwcd.com)
Jon C. Conlin (jconlin@cwcd.com)
Cory, Watson, Crowder & Degaris, PC
2131 Magnolia Avenue
Birmingham, AL 35205
(205) 328-2200
James Hurt (jhurt@hurtstolz.com)
Hurt, Stolz & Cromwell, LLC
650 Oglethorpe Avenue
Suite 6
Athens, GA 30606
(706) 395-2750
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One of the “men” named in this lawsuit has been running from his obligation and is 14,000.00 behind in child support!!! Although he did me a huge favor by leaving… he a typical loser. To see his name in this article does not suprise me he has always been a scammer!!!
Steve- I’m trying to understand. Their fee structure for the time, is not that bad in comparison to the typical 15% of debt model. Was there any indication if any of the plaintiff’s debts were settled- Or how  the defendants fees became $5,140? I do not really see that figure being a possibility based on how much she had saved. Also, it seems, from the report, that no debt was settled; Based on their fee structure above, they should have earned $1,230.Â
What I’m asking is did the defendant charge the client differently than the contract had outlined? It’s the obvious conclusion, but is that what you think too?
Best Regards-
This case is a classic example of the result of a fast and loose approach many companies took. The number of debt relief companies that got in and thought that charging a typical fee was all they needed to worry about.
Georgia was always a state to avoid because of their debt adjusting law already on the books at that time. Unless you kept the fees within that statute you became a good target for litigation.
“Georgia law regulates the activities of companies that offer credit counseling and renegotiation and payoff of consumer debt. Under the Debt Adjustment Act (O.C.G.A. Section 18-5-1 et seq.), a debt adjusting company may not charge a fee of more than 7.5 percent of the amount a client pays monthly for distribution to his or her creditors. ”
So the defense is a non-starter the minute the contract was signed and any fees were paid regardless if any debt was settled.
What is so amazing is that companies avoided registering in Georgia even though it is one of the easier registration forms to deal with. GA Registration form.
Yes- We went through it with GA & at least their bonding requirement is light compared to some (basically just ask for Employee Dishonesty Bond)- But they are another state who wrote the law to govern D M’s and have basically just lumped D S companies into it (like FL).Â
It’s a shame the FTC rule doesn’t simply govern all of it! The different requirements and difficulty in navigating and interpreting the state laws make it truly difficult for the Performance Based DS companies to work- Then most states have the “attorney exemption”… Let’s face it, if it (the exemption) were used correctly it makes sense. But as it stands, states (in many cases)have limited the ability of the small, performance based company to operate- This will leave those states with many more attorney based, national, front fee companies in their state doing business under the exemption! And, in my opinion, leave consumers with less (and worse) options.Â
Virtually any bonding requirement is next to nonsensical when there are no fees paid until services rendered. Laws in place prior to TSR’s are now a bit out of touch with the realities created last year.
I agree with Sean about what is left for consumers, less and worse options.
My question is what is anyone willing to do about it? Form a coalition to put the facts infront of the people that matter? The whole industry is disjointed. When a form of unity did exist, it was all about profit and no regulation. I hope everyone sees how that didnt work and if trying to do something cohesively again, choose leadership that has a clue!
Attorney models as they stand now will not be the same in 12 months. Big news on the horizon but these things take time in an enforcement era with limited resources.