Previously covered the suit filed by the debt settlement company Morgan Drexen against the CFPB, here.
Today I went to see what, if any, updates there were on the case. Here is the latest:
“The Court held two on the record telephone conference calls with the parties on July 24, 2013 and July 25, 2013, during which Plaintiffs consented to withdraw their 3 motion for preliminary injunction and both parties consented to instead proceed with an expedited briefing on the merits of Plaintiffs’ Complaint.
The parties jointly proposed a schedule, which this Court granted. Accordingly, and in order to administer this civil action in a manner fair to the litigants and consistent with the parties’ interest in completing this litigation in the shortest possible time and at the least possible cost, the parties are directed to comply with each of the directives set forth in this Order.
Further, the parties shall adhere to the following schedule: (a) On or before AUGUST 7, 2013, Plaintiffs shall file their motion for summary judgment; (b) On or before AUGUST 27, 2013, Defendant shall file its opposition to Plaintiffs’ motion for summary judgment and cross-motion to dismiss and/or for summary judgment; (c) On or before SEPTEMBER 13, 2013, Plaintiffs shall file their reply in further support of their motion for summary judgment and opposition to Defendant’s cross-motion; and (d) On or before SEPTEMBER 25, 2013, Defendants shall file its reply in further support of its cross-motion to dismiss and/or for summary judgment. Additional dates will be set as necessary. The dates identified above are firm; the Court has endeavored to give the parties the schedule that they have requested and expects that they will adhere to that schedule. The Court shall also endeavor to issue a ruling on the parties’ motions on an expedited basis and will advise the parties in the event a hearing is necessary.”
As part of the court documents filed was a statement by Todd Zywicki that he is going to be an expert witness in the case at $500 an hour. Good for him. – Source
Preferred Creditor Program?
There is an interesting bit of information that says Morgan Drexen has pre-negotiated settlement rates with some creditors as part of their “Preferred Creditor Program.” I wonder if better settlement would have been available on an individual basis instead of consumers being subject to a previously negotiated rate?
And if the rate is already known then how much negotiation is necessary on these accounts and what settlement fee is the consumer paying for these accounts then?
The creditors that participate in this program are:
(1) Aargon Agency
(2) AFNI, Inc.
(3) Alliance One
(4) American Express
(5) Apex Financial
(6) Arsi
(7) Asset Acceptance
(8) Associated Recovery Systems
(9) Brachfeld & Associates
(10) Capital Management Systems
(11) Capital One Bank
(12) Cardworks Servicing
(13) Cash Call
(14) Cavalry Portfolio Services
(15) Chase Bank USA, N.A.
(16) Citibank USA, N.A.
(17) Client Services, Inc.
(18) CollectCorp
(19) Couch, Stillman, Blitt & Conville
(20) Credit Control
(21) Creditors Financial Group
(22) Creditors Interchange
(23) Delanore, Kemper & Associates, LLC
(24) Dynamic Recovery Solutions, Inc.
(25) First Asset Recovery Group, LLC
(26) First Capital Recovery, LLC
(27) First Financial Asset Management
(28) Firstsource Advantage, LLC
(29) Forster & Garbus
(30) Frontier Financial Group, Inc.
(31) Full Circle Financial Services
(32) GE Money Bank.
(33) Global Acceptance Credit Company
(34) GMC Credit Services, LLC
(35) GT Services
(36) HFC Beneficial
(37) HP Debt Exchange
(38) HSBC
(39) Icon Equities, LLC
(40) Jefferson Capital Systems
(41) Judgment Enforcement Law Firm, PLLC
(42) Kramer & Associates
(43) Leading Edge Recovery Solutions
(44) LHR, Inc.
(45) Matthew Thomas & Associates, LLC
(46) Mattia Debt Management
(47) MCM
(48) Merrick Bank
(49) Michael Andrews & Associates
(50) MRS Associates
(51) National Credit Adjusters
(52) National Credit Solutions
(53) National Enterprise Systems
(54) National Recovery Solutions, LLC
(55) Nationwide Credit, Inc.
(56) NCO Financial Systems, Inc.
(57) Northland Group, Inc.
(58) P & B Capital Group, LLC
(59) Palisades Collection, LLC
(60) Phillips & Cohen Associates, Ltd.
(61) Portfolio Asset Group
(62) Portfolio Recovery Associates
(63) Portfolio Recovery Services
(64) Resurgent Capital Services, LP
(65) Richard J. Boudreau & Associates, LLC
(65) RJM Acquisitions
(66) Second Round, LP
(67) Settlement Collections, LLC
(68) Stoneleigh Recovery Associates, LLC
(69) Target National Bank
(70) US Bank
(71) Valentine & Kebartas, Inc.
(72) Washington Mutual
(73) Wells Fargo Financial Bank
(74) Weltman, Weinberg & Reis Co., L.P.A.
(75) West Asset Management
(76) World Financial Network National Bank
(77) Zwicker & Associates, P.C.
Timeline
And then there was this great timeline and copies of the CFPB Civil Investigative Demands. Interesting.
On March 13, 2012, CFPB issued a Civil Investigative Demand (“CID”) to Morgan Drexen. A true and correct copy is attached hereto as Exhibit 1.
On March 30, 2012, Kent Markus of CFPB sent a letter to me modifying certain of the document requests set forth in the March 13, 2012 CID. A true and correct copy is attached hereto as Exhibit 2.
On April 13, 2012, Morgan Drexen submitted its First Response to the March.13, 2012 CID. A true and correct copy is attached hereto as Exhibit 3.
On April 23, 2012, I sent a letter to CFPB with the re: line “Second Response to [the March 13, 2012] [CID]” enclosing a CD-ROM with information responsive to certain of the March 13, 2012 CID requests. A true and correct copy is attached hereto as Exhibit 4.
On April 24, 2012, Wendy Weinberg of CFPB sent a letter to me alleging certain deficiencies in Morgan Drexen’s production. A true and correct copy is attached hereto as Exhibit
On April 27, 2012, I sent a letter to CFPB enclosing Morgan Drexen’s Third Response to the March 13, 2012 CID. A true and correct copy is attached hereto as Exhibit 6.
On Ma y 7, 2012, I sent a letter to CFPB responding to CFPB’s April 24, 2012 letter. A true and correct copy is attached hereto as Exhibit 7.
On May 10, 2012, I sent a letter to CFPB concerning the inadvertent production of privileged material. A true and correct copy is attached hereto as Exhibit 8. I consider this Morgan Drexen’s Fourth Response to the March 13, 2012 CID.
On May 11, 2012, I sent a letter to CFPB enclosing Morgan Drexen’s Fifth Response to the March 13, 2012 CID. A true and correct copy is attached hereto as Exhibit 9.
On May 11, 2012, Wendy Weinberg of CFPB sent a letter to me alleging deficiencies in Morgan Drexen’s production. A true and correct copy is attached hereto as Exhibit 10.
On May 18, 2012, I sent a letter to CFPB responding to the May 11, 2012 letter. A true and correct copy is attached hereto as Exhibit 11. I consider this Morgan Drexen’s Sixth Response to the March 13, 2012 CID.
On May 29, 2012, I sent a letter to CFPB enclosing Morgan Drexen’s Seventh Response to the March 13, 2012 CID. A true and correct copy is attached hereto as Exhibit 12.
On June 1, 2012, Wendy Weinberg of CFPB sent a letter to me alleging deficiencies in Morgan Drexen’s production. A true and correct copy is attached hereto as Exhibit 13.
On June 1, 2012, I sent a letter to CFPB enclosing Morgan Drexen’s Eighth Response to the March 13, 2012 CID, A true and correct copy is attached hereto as Exhibit 14.
On June 6, 2012, Wendy Weinberg of CFPB sent a letter to me alleging deficiencies in Morgan Drexen’s production. A true and correct copy is attached hereto as Exhibit 15.
On June 15, 2012, I sent a letter to CFPB responding to the June 1, 2012 letter. A true and correct copy is attached hereto as Exhibit 16. I consider this Morgan Drexen’s Ninth Response to the March 13, 2012 CID.
On June 22, 2012, I sent a letter to CFPB with an additional response to the June 1, 2012 letter. A true and correct copy is attached hereto as Exhibit 17. I consider this Morgan Drexen’s Tenth Response to the March 13, 2012 CID.
On June 26, 2012, I sent a letter to CFPB enclosing Morgan Drexen’s Eleventh Response to the March 13, 2012 CID. A true and correct copy is attached hereto as Exhibit 1S.
On July 2, 2012, Wendy Weinberg of CFPB sent a letter to me requesting additional information. A true and correct copy is attached hereto as Exhibit 19.
On July 10, 2012, I sent a letter to CFPB enclosing Morgan Drexen’s Twelfth Response to the March 13, 2012 CID. A true and correct copy is attached hereto as Exhibit 20.
On July 16, 2012, I sent a letter to CFPB enclosing Morgan Drexen’s Thirteenth Response to the March 13, 2012 CID. A true and correct copy is attached hereto as Exhibit 21.
On July 24, 2012, I sent a letter to CFPB enclosing Morgan Drexen’s Fourteenth Response to the March 13, 2012 CID. A true and correct copy is attached hereto as Exhibit 22.
On July 27, 2012, I sent a letter to CFPB concerning its request for bankruptcy documents. A true and correct copy is attached hereto as Exhibit 23.
On August 2, 2012, I sent a letter to CFPB enclosing Morgan Drexen’s Fifteenth Response to the March 13, 2012 CID. A true and correct copy is attached hereto as Exhibit 24.
On August 7, 2012, I sent a letter to CFPB enclosing Morgan Drexen’s Sixteenth Response to the March 13, 2012 CID. A true and correct copy is attached hereto as Exhibit 25.
On August 7, 2012, I sent a letter to CFPB enclosing Morgan Drexen’s Seventeenth Response to the March 13, 2012 CID. A true and correct copy is attached hereto as Exhibit 26.
On August 30, 2012, Mark Baute, an attorney representing The Howard Law Group (an attorney supported by Morgan Drexen) sent a letter to CFPB stating that “Morgan Drexen does not have any unilateral right to produce information or documents belonging to the Law Firm or the clients of the Law Firm.” A true and correct copy is attached hereto as Exhibit 27.
On September 4, 2012, CFPB sent a letter to Mark Baute stating that it had issued a CID to The Howard Law Firm, and that Mr. Baute “may not interfere with the Bureau’s investigation of another entity. . . . ” A true and correct copy is attached hereto as Exhibit 28.
On September 7, 2012, I sent a letter to CFPB providing additional information in response to the March 13, 2012 CID. A true and correct copy is attached hereto as Exhibit 29.
On September 11, 2012, I sent a letter to CFPB concerning CFPB’s demand that Morgan Drexen produce data for bankruptcy support services Morgan Drexen provides to The Howard Law Firm. A true and correct copy is attached hereto as Exhibit 30.
On October 1, 2012, CFPB issued another CID to Morgan Drexen, this time seeking oral testimony. A true and correct copy is attached hereto as Exhibit 31.
On November 8 and 9, 2012, CFPB deposed Jeffrey Katz, David Walker, and Laura Wiegman of Morgan Drexen.
On February 28, 2013, CFPB issued another CID, this time to Walter Ledda, the Chief Executive Officer of Morgan Drexen.
On April 12, 2013, CFPB deposed Walter Ledda.
On April 22, 2013, CFPB sent a letter to me in accordance with CFPB’s Notice and Opportunity to Respond and Advise (NORA) process. A true and correct copy is attached hereto as Exhibit 32.
On May 8, 2013, I sent a letter to CFPB responding to the April 22, 2013 NORA letter. A true and correct copy is attached hereto as Exhibit 33.
On June 12, 2013, CFPB sent a letter to me alleging more deficiencies in Morgan Drexen’s production in response to the March 13, 2012 CID. A true and correct copy is attached hereto as Exhibit 34.
On July 8, 2013, CFPB sent me an email alleging deficiencies in Morgan Drexen’s production in response to the March 13, 2012 CID. A true and correct copy is attached hereto as Exhibit 35.
You can read all of the exhibits mentioned above, here.
Who Owns Morgan Drexen
I’m not sure I ever knew this bit of information before:
Shareholders:
1. Walter Ledda: 76.4%
2. Avi Gupta: 14.4%
3, Mark Kruitbosch: 5.2%
4. Rita Augusta: 4.1%
Morgan Drexen says they are not a debt settlement company but a “software development company that integrates its proprietary software, Morgan Drexen Integrated Systems with paraprofessional and administrative support services to generate greater efficiencies and productivity.”
Feel Free to Keep Reading
If you want to read more, feel free to get a fresh cup of coffee and find a comfortable seat. These 253 pages will take a while to get through. I stopped at page 132 because I had to run out.
If anyone spots any additional interesting material, please post it in the comments below.
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http://www.youtube.com/watch?v=GpJD06c0Rks
Steve, You nailed it better than FOX News. Just follow the 4 W’s, how hard is that. It seems as though Morgan Drexen has some serious money to spend.
Interesting video. Morgan Drexen Plaintiff says she represents indigent and lower middle class consumers. I did get a chuckle out of the screen shot below.
One other observation. The CFPB asked for, “All telemarketing or other scripts used by Morgan Drexen, Associated Attorneys, or third parties providing services to Morgan Drexen or Associated Attorneys relating to Debt Settlement services.”
Morgan Drexen says, “With respect to “telemarketing” scripts, after a diligent search and reasonable inquiry into this matter, the Company is not in possession of, nor has the Company ever been in possession of the requested documents.”
wow, they have no scripts, even scripts by third party providers? They have NEVER been in possession of scripts? Nor of anyone else’s scripts? Very hard to believe. If false, it seems it could easily be determined. Seems they would have had too many employees to be able to keep that under wraps, if it wasn’t true. Bold statement
They do mention, “The policies and procedures, training manuals and scripts utilized by employees at Morgan Drexen are generally written by or with the input of the managers and supervisors of the department which utilizes the materials. The managers and supervisors are required to forward all policies, procedures, training manuals and scripts to the Company’s Chief Operating Officer, Rita Augusta, for her review and approval. Additionally, the materials will be forwarded to Morgan Drexen’s Corporate Legal Department for their approval, as needed. Lastly, if an Associated Attorney has requirements that are specific to their clients, any policies, procedures, training manuals and scripts created by the Company to address the requests of the Associated Attorney will be forwarded to the Associated Attorney for his / her review.”
But with all those parties involved, the scripts still can’t be found.
And they also say, “On May 11, 2012, Morgan Drexen produced to the Bureau 500 sample recordings of consumer intake calls. Morgan Drexen respectfully suggests that these recordings provide a sufficient sampling because the vast majority of consumer intake calls are based on the same script.”
So apparently there are some scripts.
So I finally had a chance and go back to read the document again. It appears the Preferred Creditor Department with Morgan Drexen “Department is responsible for communicating with creditors who participate in the attorneys’ Preferred Creditor Program. The department performs a weekly update with the preferred creditor to determine whether or not the creditor or collection agency is collecting on a debt owed by the clients of attorneys supported by Morgan Drexen. If so, pending the review and acceptance of the attorneys and their clients, the creditor or collection agency will settle the debt at the agreed upon preferred rate.” It appears Morgan Drexen did supply some additional information regarding agreements with creditors but that was not part of the public documents.
Morgan Drexen also says the Preferred Creditors department has commission based compensation.
So the question raised in the original article is still a valid one regarding the preferred creditor program it seems.
“The idea fort he Preferred Creditor Program was originally conceived by Walter J. Ledda, Morgan Drexen’s Chief Executive Officer. The program was thereafter presented to the Associated Attorneys for their thoughts and authorization for implementation with their clients. Since the creation of the program, Cris Signorino, the Preferred Creditor Relations Manager, and Tod Stokes, the Preferred Creditor Account Executive, have been responsible for approaching creditors and debt collectors for participation in the program.”
If the associated attorneys were aware of this back office agreement I wonder if the actively disclosed it to their clients and if not if that created a fiduciary issue regarding putting the needs of the client ahead of the needs of the Preferred Creditor Program.
Much is made about the Preferred Creditor program yet Morgan Drexen says, “Morgan Drexen does not enter into any “relevant” contracts or agreements with creditors that participate in the “Preferred Creditor Program.”” That seems a bit odd since they say they have pre-negotiated rates with the participants.
The Preferred Credit Program department has a commission based compensation, just like other negotiators Morgan Drexen. Part of their compensation, is based on the % savings on of the total balance owed. So that is in line with their clients interest, however other add on banking fee’s maybe not. what is of interest, is not all companies on the Preferred list issue loans, or own debt, some are just collection agencies who work for banks or debt buyers, and usually need their clients to approval to settle the debt where Morgan Drexen would like to see it.
According to Morgan Drexen the Preferred Creditor Program is not the only department to receive commission based compensation. “Creditor Relations, Legal Intake, Marketing, Preferred Creditors, and Processing.” Do you have specific personal knowledge these departments are commissioned based on how much they save the consumer?
No idea how much negotiators save consumers, but do know they make percent of fee’s they make for there company. Fee’s are based on the percent of savings provided to the consumer. I.e settle debt for 50%, earn 20%-33% on the 50% savings. However, I think the issue the CFPB is making is that Morgan Drexen was taking fee’s, that were not commission based, similar to a retainer for an attorney. It appears CFPB wants attorney’s who charge any non commissional fee’s to just offer bankruptcy solutions in the consumer debt space, If Morgan Drexen did not pretend it was a attorney network, and believe they could get away with charging fee’s, instead of being 100% commission based they may not be in the deep end of the pool.
“Preferred Creditor Program” I’m curious to know what set
rates they have with these companies and if there are any other tie-ins as
well? Is it in the best interest of a client to have a electronic blanket
settlement or a negotiated one. Reminds me too much of the Robo-signing,
M.E.R.S mortgage crises.
Yes. I think you see the same potential problem I did.