Quick Answer: The Law Center for Consumer Debt faces a Georgia class action lawsuit alleging violations of state debt adjustment laws for charging excessive fees and operating without proper authorization. The California-based company allegedly provided debt settlement services to Georgia residents while not being registered to conduct business in the state.
On July 10, 2012 Gerad Dure and Elza Dure filed suit (2:12-cv-00161-WCO) against The Law Center for Consumer Debt, Law Offices of Craig Zimmerman, Craig Zimmerman, and Madonna Powers.
The Georgia class action suit alleges the Denendants violated the Georgia Debt Adjustment Act that strictly regulates the business of debt adjusting and specifically limits the charges, fees, contributions, or combinations thereof that debt adjusters may charge to consumers.
The Law Center for Consumer Debt and the Law Offices of Craig Zimmerman are located in Santa Ana, California.
Every weekday I read the enforcement actions, filings and fine print the outlets skip, and turn them into the one or two moves that actually improve your position — a rate worth moving for, a fee you can refuse, a deadline to beat before it costs you.
In the latest issue (Oct 6): When fear picks your debt plan
I write Your Money Actually most weekdays — actionable money information you will not find anywhere else, and the small decisions that compound. It is free, I sell nothing, and I take no money from any company I write about.
This suit seems to touch on a number of issues we’ve covered previously. For example, while the Defendant’s were soliciting business in Georgia, they were allegedly not registered or authorized to do business or practice law under the laws of the State of Georgia.
The Daily Money Brief — Free, at 10 AM
Money you may be owed, scams to dodge, and the fine print decoded — the consumer money news that affects your wallet, every weekday.
On the other hand, Brenda Powers is an attorney licensed to practice in Georgia and is located in Fannin County, Georgia.
The suit alleges the Defendant’s are in the business of providing “debt settlement” services for a fee, which falls under the laws of Georgia and were not in compliance with debt adjusting laws.
From the suit we learn:
“Defendants represented that they would analyze Plaintiffs’ financial situation, negotiate with Plaintiffs’ creditors to lower their interest rates and principal amount owed, and reduce their debt. Defendants made the same representations to the Proposed Plaintiff Class members.
A debtor participating in Defendants’ Debt Settlement Plan (“DSP”) pays a certain sum, determined by Defendants, monthly into a bank account dedicated to accruing funds for future settlement of debts “enrolled” in the DSP, thereby diverting all of the debtor’s monthly payments directly to creditors.
The apparent purpose of the DSP program is to “sweat-out” a debtor’s creditors by withholding payments towards the debts for several months, causing the debts to enter default, and/or forcing the original creditors to “charge-off” the debt and sell the debt to a “junk” debt buyer who purchases the debt for a fraction of its pre-default value. Once the debt is in default, charged off, or sold to a debt buyer, Defendants will allegedly attempt to negotiate a settlement of the amount owed at a discount of the originally owed amount.”
As we’ve talked about a number of times, giving accurate and realistic projections and estimates based on actual client performance is critical.
“Defendants represented through written estimates that they had historical experience in achieving similar results for consumers, which representation was materially false.
At the time Plaintiffs contacted Defendants, Plaintiffs had incurred personal debt obligations totaling approximately $42,957.16.
Defendants, or their agents, charged and accepted from the Plaintiffs approximately $6,308.47.
Of the money Plaintiffs paid, and was received by the Defendants, Defendants retained 10% of the enrolled debt, or $4,295.47, as their “fee” for the proposed debt adjusting service The money accepted by Defendants from Plaintiffs exceeded 7.5 percent of the amount paid monthly by Plaintiffs for distribution to their creditors in violation of OCGA § 18-5-2.
The Defendants failed to distribute all funds received from the debtor, less authorized fees, within thirty (30) days in violation of OCGA § 18-5-2(a).”
We’ve also talked in the past about the fiduciary duty that debt relief providers have to consumers to act in the best interest of the consumer when providing debt adjusting services.
The suit alleges, “The Defendants represented to the Plaintiffs and Plaintiff Class Members that the Defendants would provide sophisticated debt settlement services in negotiating a resolution of the Plaintiffs’ debts based on a track record of obtaining similar results for other clients.
The Defendants represented to the Plaintiffs and Plaintiff Class Members through standard written documentation that the Defendants would handle all of the Plaintiffs’ credit obligations.
Based upon the representations made by the Defendants, the Defendants had a fiduciary duty to the Plaintiffs and Plaintiff Class Members to act in their best interest and to provide competent advice regarding the restructuring of the Plaintiffs’ credit obligations, and to abide by the law.
The Defendants breached their fiduciary duty by failing to comply with the GDAA, by misrepresenting the willingness of creditors to resolve class member debt through debt settlement, by misrepresenting the ability of the Defendants to resolve class member debts, by failing to secure agreements with the creditors of the class members to resolve their debts and by performing no service of value for the fees the Defendants received.
As a result of the Defendants’ breach of fiduciary duty, the Plaintiffs and Plaintiff Class Members incurred damages, and are entitled to damages for their losses, attorney’s fees, costs of this litigation.”
The case was filed by:
HURT, STOLZ & CROMWELL, LLC
James W. Hurt, Jr.
Georgia Bar No. 380104
Jean G. Mangan
Georgia Bar No. 182828
345 West Hancock Avenue
Athens, Georgia 30601
(706) 395-2750
Facsimile: (866) 766-9245
jhurt@hurtstolz.com
jmangan@hurtstolz.com
You can read the full complaint here.
I can always use your help. If you have a tip or information you want to share, you can get it to me confidentially if you click here.
Dealing With Debt? Understanding your options is the first step. See how all your debt relief options compare — including ones most sites won’t tell you about. The Find Your Path quiz gives a recommendation based on your actual numbers, and the Scam-O-Meter checks any company’s complaint history before you sign. Federal Reserve research shows bankruptcy filers recover faster than those who don’t file.
