On January 28, 2012 Carla Broyles, Charity Miaco and Melba Walker filed a class action lawsuit in Georgia against Persels & Associates, Ruther & Associates, Freedom Debt Relief, Consumer Law Associates, Amerix, Careone Services, Tiffany Rowe.
The suit states it covers all Georgia resident debtors who have done business with Defendants since July 2003 to the present for violations of Georgia’s Debt Adjustment Act, OCGA §§ 18-5-1.
The case alleges the Defendants created an illegal debt settlement scheme, Defendants “associate” a Georgia licensed attorney to conduct a cursory interview with the Georgia debtor. Upon information and belief, Persels & Associates, LLC f/k/a Ruther & Associates, LLC; Persels & Associates, LLP; Persels & Associates, PLLC; and Consumer Law Associates, LLC; (Collectively hereinafter referred to as the Persels Organizations), are careful to select young, inexperienced attorneys in a solo or small practice with little to no experience in the consumer law arena. These attorneys are paid a small fee for the “use” of their bar license, in an attempt to shield the Persels Organizations, Amerix Corporation, and CareOne Services, Inc. from liability behind the “attorney exemption” to the Debt Adjustment Act, OCGA § 18-5-3.
The case does mention how the focus of marketing by the named debt relief companies was targeted to the “Avoid Bankruptcy” message. “Looking for a miracle, or at least an alternative to avoid the stigma of bankruptcy, these Georgia citizens are most vulnerable to Defendants’ siren song of virtually instant financial relief.”
The following facts are directly from allegations made in the filed complaint.
Facts Related to Carla Broyles
- Prior to June 2010 Plaintiff Broyles had undergone some financial difficulties, and as a result, began to amass debt in the form of unsecured creditcard debt.
- Broyles had incurred in excess of $18,000.00 dollars in unsecured debt owed to seven credit card companies.
- Due to the interest rates charged by the credit card companies and the large amount owed on these accounts, Broyles began to have significant difficulty covering her monthly financial obligations.
- Plaintiff Broyles became aware of Defendant CareOne through its advertisements in the media and its website, www.careonecredit.com.
- Broyles contacted CareOne and their agents or employees informed her that she was an ideal candidate for Defendants’ debt management program (“DMP”) in which her creditors would be paid each month under terms negotiated by Defendants.
- Broyles entered into an agreement with CareOne in or about November 2009 which required Broyles to make payments of $478.00 per month. In concert with CareOne, Amerix provided the accounting and process services for Broyles to further the debt adjusting services provided by CareOne.
- Of this amount, $440.00 was paid piecemeal to six different creditors, $33.00 per month was held by CareOne and Amerix as a “monthly service fee” and $5.00 per month was held as a “member benefit services” fee.
- Broyles made six payments of $478.00 per month to CareOne from November 2009 to April 2010 for a total of $2,868.00, of which $228.00, or 7.9%, was kept by CareOne.
- Broyles subsequently received a call from CareOne informing her that there was a better program and referred her to Persels & Associates.
- Defendants Persels & Associates promote themselves as experts in financial recovery and debt settlement solutions for struggling consumers, offering assistance to consumers in order to help them regain financial control of their lives and reduce their debt liabilities.
- The Persels Organizations, through facilitation and assistance by CareOne and Amerix, contacted Broyles some time between April and June of 2009 and its agents or employees informed her that she was an ideal candidate for Defendants’ debt settlement program (hereinafter referred to as “DSP”).
- On or about June 19, 2010, Broyles entered into an agreement with one or more of the Persels Organizations for the purpose of debt settlement.
- Upon information and belief, the Persels Organizations began to handle the customer service (or “front-end”) work of the DSP, while CareOne and Amerix continued to handle the debt negotiation, debt payments, and financial processing (or “back-end”) work of the DSP for Broyles’ account.
- Upon information and belief, CareOne and Amerix continued to do back-end processing on Ms. Broyles account while extracting higher fees from Plaintiff pursuant to her agreement with a member of the Persels Organizations.
- The agreement with the Persels Organizations required Broyles to make payments by electronic withdrawal from her checking account of $299.00 per month, of which the Defendants accepted $124.00 per month as a “contingency fee” and $50.00 per month was collected as a “monthly fee.”
- The payments were collected by the Defendants from June 2010 to December 2010 from Plaintiff Broyles’ account for a total of $2,093.00.
- A single settlement for $675.00 was paid by Defendants on Plaintiff Broyles’ Credit Union Credit Card debt in four installments.
- Save this single settlement, Broyles’ other creditors were never paid, though Defendants retained $1,218.00 in fees (58%) and $200 in escrow.
- During the time that Broyles was participating in Defendants’ DSP, she was the target of a debt collection suit brought by one of her creditors, Chase Bank, USA.
- Plaintiff Broyles contacted Defendants regarding this debt collection action against her.
- Despite the language in the “DEBT SETTLEMENT REPRESENTATION SUMMARY AND GENERAL DISCLOSURES”, Defendants instead sent Plaintiff Broyles the “Do It Yourself Guide to: FILING AN ANSWER TO A COMPLEX COMPLAINT FOR DEBT” and sent a pre-drafted “Defendant’s Answer” for Plaintiff Broyles to execute and file with the Paulding County Superior Court.
- Plaintiff Broyles was never contacted by her alleged “Georgia attorney” in regards to legal representation as provided for in “DEBT SETTLEMENT REPRESENTATION SUMMARY AND GENERAL DISCLOSURES”, but was instead left to fend for herself.
Facts Related to Melba Walker
- Prior to March 2010, Plaintiff Melba Walker (“Walker”) had undergone some financial difficulties, and as a result, began to amass debt in the form of unsecured credit-card debt.
- Walker had incurred in excess of $19,000.00 dollars in unsecured debt owed to four credit card companies.
- Due to the interest rates charged by the credit card companies, the large amount owed on these accounts and lost hours at work, Walker began to have significant difficulty covering her monthly financial obligations.
- Prior to March 2010, Walker became aware of Defendant Freedom Debt Relief, LLC f/k/a Freedom Debt through advertisements in the media, specifically 5 – 6 am advertisements during the show, “The Daily Buzz.”
- Freedom Debt promotes itself as an expert in financial recovery and debt settlement solutions for struggling consumers, offering assistance to consumers in order to help them regain financial control of their lives and reduce their debt liabilities.
- Walker contacted Freedom Debt who informed her that she was an ideal candidate for Defendants’ “Debt Elimination Program” (hereinafter referred to as “DEP”).
- Upon information and belief, Freedom Debt is the marketing arm of Defendants’ Debt settlement enterprise that is responsible for recruiting debtors and passing their accounts to other members of the joint enterprise, including the Persels Defendants and CareOne.
- Around early March 2010, Walker’s enrollment with Freedom Debt was then transferred to CLA, another joint venture of Defendants, with whom she entered into a “Client Retainer Agreement” with CLA for the purpose of debt settlement.
- The Agreement requires CLA’s clients to pay a non-refundable retainer fee of 10% of client’s unsecured debt at the time of execution of the Agreement which for Walker was $1,941.11.
- CLA additionally charge their clients an “initial Consultation Fee of $100.00” and a “monthly program fee of $85.00″ each month that the client remains in the program.
- Included in CLA’s Agreement is an “Estimated Savings and Settlement Summary” (attached as Exhibit C at 000010) which estimates settlement with each of Walker’s four creditors at 50%, or a total of $9,705.54.
- Per CLA’s plan to settle at 50% as detailed in their fee schedule (attached hereto as Exhibit C at 000008), Walker would ultimately pay $6,135.11 in retainers and fees for a $9,705.54 settlement of her debt.
- This $6,135.11 represents a whopping 63% of her estimated settled debt and 32% of her original $19,420.06 debt.
- Defendants initially took $393.11 for a set-up fee on March 28, 2011, none of which was paid to creditors.
- Defendants debited Walker’s checking account in the amount of $330.00 each month beginning on April 28, 2010 and on the 28th day of each month until March 28, 2011, for a total of 12 payments equaling $3,960.00.
- Each month that Defendants withdrew monies from Plaintiff’s account, Defendants kept $279.11 in retainer and service fees and deposited $50.89 in a Trust Account.
- During the time Walker had been a client of Defendants, she paid approximately $4,290.00 to Defendants in fees, and had a remaining balance of $1,193.00 allegedly held in a trust account.
- On June 23, 2011, Walker received a letter from Defendants, via CLA, acknowledging her cancellation of their representation for her and a check for $1,023.00.
- None of the funds Walker has paid into Defendants’ DEP have gone to pay any of Walker’s creditors.
Facts Related to Charity Miaco
- Prior to July 2009, Plaintiff Charity Miaco (hereinafter “Miaco”) had undergone some financial difficulties, and as a result, began to amass debt in the form of unsecured credit-card debt.
- Miaco had incurred in excess of $30,000.00 dollars in unsecured debt owed to seven credit card companies.
- Due to the interest rates charged by the credit card companies and the large amount owed on these accounts, Miaco began to have significant difficulty covering their monthly financial obligations.
- Prior to July 2009, Miaco became aware of Defendants through the Persels, LLC website.
- Miaco contacted Defendants, and their agents or employees informed her that she was an ideal candidate for Defendants’ DSP.
- Around July 13, 2009, Miaco entered into a “Retainer Agreement” with Defendants, through Persels, LLC, for the purpose of debt settlement.
- The Agreement requires Miaco to pay a non-refundable retainer fee of $4,517.00 and a $100.00 consultation fee, which would be a part of the $4,517.00 retainer fee and be paid when Miaco signed the contract agreement.
- A “payment schedule” (attached hereto as Exhibit D at 0011) was generated showing the payment amount per month in $360.90 installments for the first 18 months of a 60-month schedule beginning July 22, 2009.
- Of the $360.90 monthly installments paid by Miaco to Defendants, $308.00 went towards Defendants’ fees for the first five months and $299.00 for the next thirteen months thereafter.
- Per the payment schedule, Defendants would pay off Miaco’s debt in 60 months totaling $21,654.00, or 70% of her original debt.
- Also per the payment schedule, the amount of fees paid at the completion of the program would be $4,517.00, which is 14% of Miaco’s original $30,872.48 debt and 20.8% of the planned payments to Miaco’s creditors.
- For the $100.00 fee, Georgia attorney, Tiffany Rowe, twice spoke briefly with Miaco under the guise of “financial counseling” incidental to the practice of law, where in fact, Rowe did nothing of the sort, but merely spoke to Miaco to attempt to shield Defendants from liability under the Debt Adjustment Act.
- Around August 2010, Miaco terminated his participation in Defendants’ DSP after paying approximately $4,791.70 to Defendants.
- Of the total amount paid by Miaco into the Defendants’ DSP, $3,472.00 was kept as fees and $993.00 was actually paid in settlement to one of Mrs. Miaco’s creditors, leaving roughly $326.70 held in trust as settlement funds.
- Miaco, through [her] independent attorney, demanded the return of the nearly $3,500.00 in fees paid to Defendants. In response, Neil J. Ruther assured Mrs. Miaco’s attorney that the “restrictions of the Act with respect to fees” did not apply to his Firm, however, he offered Mrs. Miaco a $3,000 refund in return for “a full and complete release of the Firm.”
You can read the full complaint here.
This case was filed by:
James W. Hurt, Jr.
345 West Hancock Avenue
Athens, Georgia 30601
Facsimile: (866) 766-9245
HULL BARRETT, P.C.
Christopher A. Cosper
801 Broad Street, Suite 700
Augusta, GA 30901
Telephone: (706) 722-4481
Facsimile: (706) 722-9779
CORY, WATSON, CROWDER & DEGARIS, PC
George Richard DiGiorgio
F. Jerome Tapley
Jon C. Conlin
What is interesting about this case is it is the first I can recall that makes an allegation of a connection between Freedom Debt Relief and CareOne.
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