What You Can Learn From the Preferred Financial Solutions Class Action.

A class action case against Preferred Financial Solutions, Credit Card Relief, Thomas Dakich, Dakich & Associates, and Rhonda Roell-Taylor has just been moved from a Georgia Court to Federal Court. Rhonda Roell-Taylor is a Georgia attorney who the company allegedly worked with to enroll consumers into their debt adjustment program in Georgia. Thomas Dakich is an Indiana attorney who worked in cooperation with Preferred Financial Solutions.

This case is worth looking at to examine the issues facing both attorneys and debt relief companies when offering services, and service in Georgia.

The purpose of covering these cases is so other debt relief companies can learn from the issues and avoid them moving forward.

According to the complaint, the Defendant’s engaged in debt adjusting in Georgia. Georgia has some very strict fee requirements. If you are unaware what they are, register here for free access to my compliance module.

The case states it is in pursuit of “piercing the corporate veil, upon information and belief that the Defendants collectively have overextended their privilege in the use of various corporate entities in order to defeat justice, perpetuate fraud and evade tort and statutory responsibility.”

The Defendants allegedly charged Georgia consumers a 7 percent of debt enrollment fee and $49.95 per month in their debt settlement program. Additionally there was a “Local Participating Program Attorney” fee of $120.

It is alleged the fee to a local Georgia attorney was designed to create a relationship between an attorney and consumer in an attempt to avoid the strict fee limits imposed by the Georgia Debt Adjustment Act.

In Georgia the fee for debt management services is limited to 7.5% of the amount distributed monthly to the debtor’s creditors. You can see the current act here.

The complaint states that the Defendant’s website CCRNOW.com states “Our attorney-driven program is among the most successful in the country, and by assessing NO Up-Front fees you are able to participate with absolutely no risk.” And it apparently still does. That does not seem like the wisest statement to publicly make.

If any company is making such statements about their services, my suggestion would be to change them, TODAY!

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The complaint also states Preferred Financial Solutions is using the terms underwriter as part of their description. That can be a problem.

The complaint says the company says, “Underwriters review every document in your enrollment package and help you complete any missing information that may have been omitted on the Financial Statement or Enrollment paperwork. These Underwriting professionals work with you to establish a monthly payment to the Trust for the future benefit of your creditors while also helping you understand what to expect in the months ahead. If you have any specific questions, the Underwriters are able to provide additional insights so that you have a complete understanding of the CCR program.” And so it still does.

The use of underwriter can create problems for debt relief companies. It implies the company has performed a due diligence to accept the risk of accepting the client and stands behind its claims made and certifies the consumer will not incur a loss.

An underwriter gives financial support and takes responsibility for paying any costs associated with the activity he or she underwrites. An underwriter is often someone in the insurance business who may assess the risks involved with enrolling an applicant for coverage or a particular policy. The underwriter must also compensate for any loss under the terms of the insurance policy. An underwriter may also serve as an intermediary between an issuer of a security and an investor. – Source

It is a totally unnecessary use of the term underwriter and others should avoid it.

The complaint states the consumer here attempted to first get a refund of moneys paid when the program did not work out.

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“On March 16, 2009 Plaintiff, through her counsel, sent Defendants a demand letter which detailed Plaintiff’s potential claims against Defendants for violations of the Georgia Debt Adjustment Act and Fair Business Practices Act and requested a full refund of $3,000 paid by Plaintiff into Defendants’ DSP along with a $5,000 penalty authorized by the Debt Adjustment Act.”

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The response from the company was a refund of $1,710.76 and retained $469.65 “for services rendered during the duration of client’s enrollment into the program.”

I still can’t figure out why debt relief companies do not understand that a full and prompt refund is a more cost effective solution than withholding funds. It only results in bad publicity and lawsuits which are more expensive than the refunds.

The complaint also states Preferred Financial Solutions believed that it was not subject to the Georgia Debt Adjustment Act since it ran all clients through Attorney Rhonda Roell-Taylor and they were in fact law clients of that attorney. The company claims they were just backend processors.

The suit states that Attorney Taylor was offering service not exempted as incidental to the practice of law and says the consumer never spoke with Taylor and was never interviewed by Taylor.

You can read the full complaint, here.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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