I got my hands on a copy of a recent court document on a suit by a consumer against Otto Berges, Berges Law Group, Paralegal Staff Support, and Consumer Protection Counsel. The suit out of Wisconsin alleges the companies and entities may have been intertwined in a effort to sell credit repair services. The motion from Judge Griesbach says, “the lack of clarity is the understandable result of the complicated relationship between these entities and the opacity of that relationship from Plaintiff’s perspective.”
It wasn’t till I got to the end of the motion that the key point here is the debt relief providers appear to have not been selling credit repair services but in fact they were allegedly selling debt invalidation services. The motion says, “[T]his court reads the statute to reach such entities whose focus is the improvement or repair of a consumer’s credit record, credit history or credit rating, expressly or implicitly, not entities whose activities are aimed at assisting consumers in developing ‘creditworthy behavior’ and paying their debts, which may result in improved actual credit as a collateral consequence, rather than as a program objective.”). The defendant in that case, however, offered services that were designed to pay down existing debts and establish good credit practices going forward. Id. at 974–75. Here, Consumer Protection Counsel offered services that were designed to repair or remove past credit sins or errors. (Limited Legal Services Agreement, Ex. A at 1–2, ECF No. 1-1 (promising that the “Attorney” shall dispute the accuracy of amounts due, indicate the nature of any errors to the bank, request clarification of the charges from the bank, request verifications of debts from third party debt collection agencies, audit responses from various entities, request the major credit reporting agencies reinvestigate any inaccurate or derogatory information in Plaintiff’s credit report, file a complaint with the appropriate regulation agency, and initiate and pursue litigation if necessary).) These “legal services” are exclusively backward looking and at least impliedly directed at improving Plaintiff’s “credit record, credit history, or credit rating.” 15 U.S.C. § 1679a(3)(A)(I); see also Wis. Stat. § 422.501(2)(a). In fact, the services offered by Consumer Protection Counsel are much more akin to the “Post Closing Credit Restoration Program” in Plattner; a program that the judge opined would make the defendant “fall within the definition of a credit repair organization” if it was “the only service offered by [the defendant] in these documents, or even a primary aspect of the [the defendant’s] program.” 422 F. Supp. 2d at 976. Thus, because Consumer Protection Counsel—with the help of Paralegal Staff Support and Berges Law Group and at the direction of Otto Berges—used an instrumentality of interstate commerce to sell services that were directed at repairing Plaintiff’s credit in return for money, they fall within the definition of a credit repair organization and credit services organization.
The Judge summarizes this case. “The basic thrust of her complaint is that Otto Berges, Berges Law Group, Paralegal Staff Support, and Consumer Protection Counsel have, in concert, engaged in business activities that are prohibited by federal and state law by agreeing to repair or improve Plaintiff’s credit without including terms in the alleged contract that are required by law, by accepting payment for services in advance, and by making false statements to credit reporting agencies.
In particular, the complaint alleges that a representative of Consumer Protection Counsel contacted Plaintiff and offered to “fix her credit” in September 2013. (Compl. ¶ 20.) Plaintiff then signed the alleged contract with Consumer Protection Counsel on October 30, 2013. (Id. ¶¶ 21–22.)
Among other terms, Plaintiff agreed to pay approximately $7,000 in a series of payments spread out over several years. (Id. ¶ 32.) Importantly for purposes here, although Plaintiff and Consumer Protection Counsel appear to be the only parties to the alleged contract, the automatic deductions from Plaintiff’s checking account have been done by two of the other defendants: Paralegal Staff Support on November 21, December 12, and December 21, 2013, and Berges Law Group on February 21, March 21, and April 21, 2014. (Id. ¶¶ 25–30.) Plaintiff alleges that Paralegal Staff Support and Berges Law Group made these deductions based on the alleged contract with Consumer Protection Counsel at the direction of Otto Berges, who controls all of the entities.”
“As alleged in the complaint, Consumer Protection Counsel called Plaintiff in Wisconsin at some point in September 2013. (Compl. ¶ 20.) It then emailed the alleged contract and several other documents to Plaintiff. (Id. ¶¶ 21, 23.) Later, Paralegal Staff Support and Berges Law Group charged Plaintiff’s checking account on six occasions. (Id. ¶¶ 25–30.) Although the complaint does not allege the location of Plaintiff’s checking account, the Court will infer from the fact that Plaintiff is a natural person residing in Green Bay, Wisconsin, that her checking account is also located in Wisconsin. See Tamburo, 601 F.3d at 700. Moreover, the Court notes that Plaintiff redacted her bank account information from the alleged contract attached to the complaint in order to comply with the federal rules, see Fed. R. Civ. P. 5.2(a), and Plaintiff’s counsel indicated that the checking account was located in Wisconsin at oral argument. Finally, according to Plaintiff, all of these acts were done at the direction of Otto Berges, (Compl. ¶ 37), an allegation supported by the search results provided by Plaintiff.”
“Finally, Consumer Protection Counsel maintains that it is not a “credit repair organization” or “credit services organization.” Instead, it argues that it is a law firm, presumably in Florida, providing limited legal services to Plaintiff according to a written agreement. While the services it agreed to provide Plaintiff may affect her credit, Consumer Protection Counsel maintains that the “purpose” of the contract was not to improve Plaintiff’s credit score or alter her credit report. The Court rejects Consumer Protection Counsel’s narrow interpretation of the alleged contract and the statutes.”
You can read the entire opinion from Judge Griesbach, here.
While it is too early to determine the outcome of this case, it does bring up another pothole to avoid for debt relief companies who are selling any kind of debt elimination service.