Debt Relief Industry

Nationwide Referral Services Says Sharing Fees With Lawyers for Debt Settlement Fees is Illegal

A reader sent me a tip that a case between Safeguard Support Services and Legal Helpers Debt Resolution in Florida was still ongoing but in talks to settle. I’ve written about the case before. See Legal Helpers Debt Resolution Accused of Orchestrating Conspiracy by Safeguard.

The reader said:

The other and most recent has both sides mutually filing with the judge that they are close to and have reached settlement talks. Which leads me to believe there is some validity to Safeguards claims.

From the latest court report:

The parties are presently engaged in settlement discussions in an effort to resolve this matter conclusively and are hopeful that they are able to do so. Such settlement negotiations are ongoing and, as stated above, if the parties are unable to settle the claims or potential claims, then it is Plaintiff’s intention to move this Court for leave to amend the complaint and to prosecute this matter accordingly.

It made me curious so I took a look at the case. What I found was a very detailed report by United States Magistrate Judge Barry Seltzer that laid out a very interesting history between all the parties.

For those that have been around a number of years and have witnessed the rise and fall of the advanced fee debt settlement industry, I think you will find this as intriguing as I did.

The report is 33 pages long so I’m going to hit the highlights quickly but I invite those interested to read the full report here.

In June 2009 Safeguard entered into a branch office agreement with the law firm of Stratton & Feinstein. Legal Helpers is the successor entity to the branch office agreement.

Safeguard provided branch office administrative and marketing services “in furtherance of SF/LH’s debt resolution business.” SF/LH was to pay Safeguard certain fees.

Safeguard was to be paid “70 percent of revenues generated by the office and will be credited for any expense paid directly by [SF/LH]”

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But here is where it gets interesting.

“In moving to dismiss the Complaint, Nationwide has addressed each of the ten counts individually. Preliminarily, however, Nationwide has argued that the entire Complaint should be dismissed because it is predicated upon an illegal agreement. More specifically, Nationwide argues that the Complaint is predicated upon “an illegal lawyer-referral agreement” between Safeguard and SF/LH in which the non-legal entity, Safeguard, is sharing attorneys fees generated by the law firm”

“According to Nationwide, “in return for Safeguard’s client referral services, the law firm was to pay Safeguard a percentage – 70% – of the law firm’s attorneys’ fees generated by Safeguard’s client referrals. Nationwide notes that The Florida Bar subsequently obtained a judgment against SF’s named partners finding that they had contracted with (other) back office providers that acted as a lawyer referral service, improperly engaged in the direct solicit ion of clients on behalf of SF, and improperly engaged in fee sharing with SF, in violation of The Florida’s Bar’s Rules of Professional Conduct. Nationwide further notes that the solicitation of legal business in Florida is a first degree misdemeanor.”

It makes me wonder.

If John Lembo and Mark Mancino from Nationwide Referral Services, who latter worked closely with Legal Helpers Debt Resolution, knew or now know that sharing debt settlement legal fees was as Nationwide alleges, “an illegal lawyer-referral agreement”, where does that leave all the other folks that engaged (read that fell) for this same or similar arrangement?

About the author

Steve Rhode

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.

1 Comment

  • Thanks for your article Steve further confirming my view that sharing fees in this type of scenario would violate most, if not all, state’s rules of professional conduct.  Perhaps I will forward your article, or better yet the 33-page report, to a rep from a debt settlement company that currently is trying to get me to sign on for such an arrangement.  

    Kim Coleman
    Philadelphia Bankruptcy Lawyer

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