The Knox County, Ohio Court of Appeals issued an interesting opinion that might be of interest to anyone selling attorney based debt settlement services in Ohio.
In this case the consumer, Martha Bumpus, was sold debt settlement services by Texas based companies and now the companies will have to pay to fight their case in Ohio.
The case brings up a number of issues, including if services sold as attorney model debt settlement are truly services delivered in an attorney client relationship. It also brings in issues under the Fair Credit Reporting Act and the Credit Repair Organizations Act. Any most importantly, it addresses the issue if an attorney needs to be licensed as a debt relief provider in Ohio.
From the Appeal
According to the appeal, “Appellant Martha Humpus [“Bumpus”] appeals the January 23, 2012 Judgment Entry of the Knox County Court of Common Pleas dismissing her case against appellees Lloyd Ward P.C, dba Lloyd Ward 8 Associates, Lloyd Ward Group, LLC, Lloyd Ward, ABD Debt Relief Ltd., Co., Lloyd Renger and Kevin Devoto [hereinafter collectively “Ward “].”
Bumpus alleges that Ward is a “for profit” debt relief or credit repair company that promises consumers resolution of their credit card debt at a substantial discount. Unfortunately, some such companies predatory fee practices can exacerbate the consumer’s financial problems.
Ohio protects its citizens from predatory and potentially harmful debt relief practices by the Ohio Debt Adjustment Act, R.C. Chapter 4710 [“DACA”], the Ohio Credit Services Organization Act, R.C. Chapter 4712 [“CSOA”], and the Ohio Consumer Sales Practices Act, R.C. Chapter 1345 [“CSPA”].
Bumpus filed a complaint on May 6, 2011 alleging in part that Ward has attempted to circumvent the consumer protection laws by advancing a pretense that the debt relief services are being performed by an attorney, thereby evading the consumer protection laws applicable to debt settlement and credit repair companies. Bumpus alleged in her complaint that an attorney did not in fact perform the services.
In response on June 23, 2011, Ward filed a “Motion to Dismiss or in the Alternative to Transfer Venue.” Ward argued that Humpus’ complaint failed to state a claim upon which relief can be granted pursuant to Civ.R. 12(B)
Ward further argued Knox County, Case No. 2012-CA-5 that if the court did not dismiss the complaint pursuant to Civ.R. 12(B)(6), the court, pursuant to Civ.R. 3 and 12(B)(3), should find Knox County, Ohio to be an inconvenient forum. Ward asked the trial court to stay the proceedings to allow Bumpus to cure this defect by filing the suit in the State of Texas. Ward attached four exhibits to its motion.
Bumpus alleged that she was mislead into believing that an attorney would perform the services promised when in fact “non-attorneys” were performing the legal services. Granting Bumpus the benefit of all favorable inferences, it is possible that proof of such facts at trial could establish Ward’s liability. Furthermore, while the remaining allegations in Bumpus’ complaint may or may not prove to be relevant in determining whether Ward’s conduct amounts to a fraudulent or deceptive business practice, that inquiry involves questions of fact that are not properly addressed on a motion to dismiss. Ward’s argument about what its business actually involves more appropriately belongs in a motion for summary judgment.
For those interested in reading the full opinion, it can be found here.
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