The Consumer Financial Protection Bureau has temporarily shut down a nationwide firm that promised consumers legal help with debt relief.
World Law Group allegedly took $67 million in upfront fees from at least 21,000 people, while misleading consumers with promises that local lawyers would be available to help. World Law charged "exorbitant, illegal upfront fees from vulnerable consumers suffering financial difficulties," the CFPB alleges.
Consumers who enrolled in World Law’s heavily advertised program were told to stop paying their bills and instead pay into a special account set up to be used later for debt settlement negotiations.
The suit names three individuals — Derin Scott, David Klein and Bradley James Haskins — who, the CFPB says, control World Law. The CFPB claims the defendants work through other interrelated companies, including Orion Processing, LLC; Family Capital Investment & Management LLC a/k/a FCIAM Property Management; World Law Debt Services, LLC; and World Law Processing, LLC.
The CFPB filed suit against the firm in August and obtained a temporary restraining order against it in early September. The legal action was made public Tuesday. The CFPB is seeking a permanent injunction against the company.
Consumers allegedly rarely received relief via World Law, which siphoned big fees out of the consumers’ accounts. Initial fees were $199, followed by an "attorney monthly service fee" of $84.95 and a "bundled legal service fee" of 10% to 15% of the consumers’ outstanding balance, according to the CFPB.
Consumers rarely, if ever, actually spoke to attorneys, the CFPB said.
“As a result, consumers paid millions of dollars in illegal fees and suffered additional harms, including being subjected to collection calls, lawsuits, late fees, and lower credit scores,” the CFPB said.
Advance fee collection by debt settlement firms was banned by the Federal Trade Commission in 2010. But a loophole still entitled law firms to collect upfront fees. World Law allegedly exploited that loophole, the CFPB says.
“In or around July 2010, right before the (FTC) advance-fee ban went into effect, defendants developed a plan to avoid the advance-fee ban by continuing operations under the guise of providing legal services,” the CFPB alleges in its complaint. "Defendants then began promising consumers both debt relief services and legal representation, including by a local attorney, claiming to employ lawyers in every state. They also touted that consumers would receive the skill and expertise of a licensed lawyer to negotiate with creditors regarding their unsecured debt. ln reality, defendants do not provide the promised legal representation. Consumers rarely, if ever, communicate with a lawyer and the vast majority of services provided - if services are provided at all - are debt relief services provided by non-lawyers.”