CFPB Takes Action Against Attorneys That Charged Illegal Debt Relief Fees

The Consumer Financial Protection Bureau announced Monday (Jan. 30) that it took action against a ring of law firms and attorneys who the government watchdog contends collaborated to charge illegal fees to consumers seeking debt relief.

In a complaint filed in federal court, the CFPB alleged Howard Law, Williamson Law Firm and Williamson & Howard, as well as attorneys Vincent Howard and Lawrence Williamson, ran this debt relief operation along with Morgan Drexen, which shut down in 2015 following the CFPB’s lawsuit against that company. The CFPB is aiming to stop the defendants’ unlawful scheme, obtain relief for harmed consumers and impose penalties.

“The defendants exploited consumers who were already suffering financial difficulties by tricking them into paying steep, illegal fees,” said CFPB Director Richard Cordray in a press release. “We put a stop to this scam once already, and we intend to do it again.”

According to the CFPB, the Telemarketing Sales Rule generally prohibits debt relief providers from charging a fee until they have actually settled, reduced or changed the terms of at least one of the consumer’s debts and limits the types of fees a debt relief provider can charge for already settled debts. With this rule, consumers facing financial difficulties don’t have to pay any fees for debt relief until they receive the services they signed up for.

In the complaint, the CFPB alleged the defendants violated that rule by collecting illegal fees and deceiving consumers about upfront fees they charged. The CFPB alleged that consumers who signed up sought services only for debt relief and not bankruptcy. The contract given to consumers related to bankruptcy was a ruse to disguise illegal upfront fees. As result of the scam, the CFPB said the attorneys collected tens of millions of dollars in unlawful fees and often didn’t settle any of the debts.