Law Blog

Thursday, May 9, 2013

A House of Cards: Consumer Financial Protection Bureau Cracks Down on Debt Settlement Industry

CreditCardDominos_43_0As reported by USA Today ("N.Y. Mission Debt Settlement Firm Charged With Fraud"), the Consumer Financial Protection Bureau has charged the owner of Mission Settlement Agency and three of its employees with fraud and conspiracy.  The article explains:

"As alleged, Mission preyed upon the financial desperation of people around the country who — like so many ordinary Americans — were simply struggling to pay down their debts after the financial downturn," said Manhattan U.S. Attorney Preet Bharara.

"Most of Mission's customers failed to achieve the reduction in debt that the defendants had promised them, and some of them suffered further declines in their credit ratings, were sued by their creditors and/or fell into bankruptcy," the indictment alleges.

The CFPB alleges that the owner of the debt settlement company used its customers' fees to pay the expenses of his family's popular Brooklyn nightclub, luxury car leases, and somewhat ironically, credit card bills.  The article points out that this case,

represents the first criminal charges stemming from a referral by the Consumer Financial Protection Bureau, the federal watchdog agency created in response to the 2007 national financial crisis.

Sadly, there is nothing unique or shocking about this story.  In fact, the "business model" employed by Mission Settlement Agency is used throughout the country by countless so-called "debt settlement companies".  These debt settlement companies prey on often desperate consumers who are overwhelmed by their level of debt, who are being threatened and harassed by debt collectors, and who are unable to keep up with the minimum payments, late fees, and charges on their debt.  Consumers are typically told to stop making payments to creditors and to make immediate payments to the debt settlement company instead.  In most cases, the majority of payments made by a consumer go directly toward the debt settlement company's fees, and not to any creditor.  The simple fact is that, when a consumer fails to pay a creditor for a period of time, that creditor will file suit in court against the debtor.  At that point, the debt settlement agency is nowhere to be found and happy to point out that they are not attorneys.

A copy of the three-count criminal indictment can be viewed here.

Our office has recovered thousands of dollars on behalf of consumers who have fallen prey to these debt settlement schemes.  Typically, a client will have paid large sums of money to debt settlement companies, only to have to pay additional sums of money to retain bankruptcy counsel or consumer debt defense counsel to deal with creditors when the illusive promise of settlement fails.  The truth is that there is no quick fix in dealing with debt issues, and only a licensed attorney can advocate for a consumer in court when creditors or debt collection companies enforce debt obligations in court - which they all will.

Vaughn-Martel Law advocates for consumers both in and out of court.  Our consumer debt attorneys have assisted debtors throughout Massachusetts in resolving their debt obligations one debt at a time, with no tricks, gimmicks, or quick fixes.  We have saved our clients hundreds of thousands of dollars by employing pre-suit debt resolution strategies, and aggressively defending our clients when creditors  do file suit.




Charles River Law Partners, LLC represents clients in Suffolk County, Middlesex County, Essex County, Norfolk County, Plymouth County, Bristol County, Worcester County, Hampden County, and Franklin County.
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