Illinois Attorney General Lisa Madigan's office filed a lawsuit this week against Legal Helpers Debt Resolution, alleging the Chicago-based debt settlement company used lawyers as a front to illegally collect massive fees from consumers seeking help.
Legal Helpers charged fees upfront under a guise that attorneys were providing debt settlement services, according to the lawsuit. Madigan said attorneys with Legal Helpers served only as a front and that the debt settlement service was contracted out to nonlawyer, third-party companies.
The company, also known as the law firm Macey, Aleman, Hyslip & Searns, charged upfront fees for debt consolidation work. The state's Debt Settlement Consumer Protection Act forbids such companies from charging upfront fees and requires they only collect fees if a consumer's debt is settled.
Attorneys are exempted from the law, allowing them to charge upfront fees.
"They are essentially a referral source for a scavenger industry" seeking to profit from people's debt problems, Madigan said.
At least 1,117 Illinois consumers were signed up with Legal Helpers as of Oct. 1, according to the lawsuit.
The firm charges nonrefundable fees that include a $500 retainer, a $49 monthly charge and 15% of the total debt, according to the lawsuit.
Jason Searns, general counsel and managing partner with Legal Helpers, said Wednesday his firm has done nothing wrong and is providing an alternative for clients who do not want to declare bankruptcy, the Chicago Tribune reported.
Searns said Legal Helpers provides counsel to clients and has a "strategic alliance" with debt settlement firms to provide debt management services.
That business model is different than firms that "rent a lawyer" so they can take advantage of the upfront-fee exemption, he says.
